TRAI recommendations- Positive for DTH players

The Telecom Regulatory Authority of India (TRAI) today came out with recommendations on issues pertaining to DTH operators, broadcasters and multi-system operators (MSOs). These recommendations will need the Ministry of Information and Broadcasting’s (MIB) approval for implementation. The approval timelines need to be monitored.

Recommendation: Licence fee should be 8% of adjusted gross revenue (AGR). AGR is calculated by excluding service tax, entertainment tax, sales tax from gross revenue.
Impact: Though directionally positive for all DTH operators, they have been demanding 6% of AGR. However, the matter is currently in the Supreme Court. Hence, the apex court will have to take final decision. Also, the exact definition of AGR needs to be checked. If it also excludes activation revenue, bandwidth revenue and lease line revenue, it will be more positive for DTH players.

Recommendation: DTH licences will be issued for 20 years. Upon licensee’s request, the period may be renewed by 10 years at a time.
Impact: Positive, since the period is fairly long and imparts visibility.

Recommendation: One-time entry fee of INR100mn for new DTH licence seekers.
Impact: Positive for a new DTH licence seeker since the fee has been left unchanged.

Recommendation: A broadcaster/or anyone controlling a broadcaster can control only one distribution entity (one MSO or one DTH company).
Impact: We expect any such broadcaster to retain its distribution arm, which is larger in scale, where higher capital has been employed and growth prospects are better.