DTH seeing early sign of tariff pressures

Of late both DTH (DTH players have been taking prices upwards over last 2 years) and Cable TV (efforts
towards packaging) have been focussing ARPU improvement. However in a recent move DTH player Tata Sky launched a INR8 daily recharge voucher allowing subscribers to pay only for the days they watch TV (possibly negative from a sector perspective). While the move may be an attempt by Tata to position itself for DAS Phase3 and 4 markets as it is c60m subscriber opportunity, however characterized by relatively
low ARPUs. Moreover Dish TV runs a parallel brand in these markets and sells skinny bundles of regional channels.

Furthermore Tata Sky has followed the INR 8 daily pack with INR 99 pack for South Indian market. Given this, there is a risk that the DTH space may see some price competition in coming days. Any such move would be negative for the overall pay TV space including Cable TV as last mile owners would likely prefer to be discounted to DTH.

While we view the increase in competitive intensity as negative, it may be early to model pricing decline. That said we highlight that move by competition to subsidize set top boxes in Phase 3 will be significantly negative. Separately recent court ruling setting aside the TRAI mandated inflation linked tariff hike is positive for DTH players (may offset near term pricing pressures).

It is only recently MSOs have started getting their act right on packaging, however lower pricing by DTH players could potentially dilute those efforts. Nevertheless cable TV players particularly Hathway can offset such pricing pressures by ramping up broadband and we see broadband tariffs increasing in the near
to medium term. Nonetheless progress on packaging has been slower than estimated and we now build/adjust for license charges on broadband revenues.