DTH has threats from 4G Operators in India

We estimate that globally 46% of content is viewed on a device. So far there has been an assumption that only 4G new entrants with their wireless and wireline data capabilities were best placed to offer such services and differentiate. However, the move by Tata Sky suggests that DTH players in India are making serious efforts to address potential threats from 4G entrants. That said DTH continues to be a one way network allowing 4G players to bundle and have an edge.

Other factors where 4G players may see scope could be pricing as current prices are not mass market. That said demand too is niche today and with more subscriber traction we do see prices coming down. In our view other DTH players will be quick to replicate, most likely Bharti DTH in its attempt to limit 4G entrants’ ability to differentiate. Moreover this could allow Bharti a window to cross sell/bundle its other services as well (could be either fixed line offering /Airtel 4G data cards/hot spot devices). Separately Dish TV may follow suit and possibly complement its recently launched video on demand services.

Fate of MSOs - In our view inability to close gaps with DTH on high end product offerings may see MSOs suffering from subscriber churn. Furthermore Phase1/metro markets are key source of carriage revenues for MSOs and sharp subscriber churn in these markets may adversely impact carriage fees and profitability.