Phase 3 digitization: Slow but steady process

Our recent discussions with the industry participants indicate that Phase 3 digitization (with a deadline of Dec-15) is progressing at a slow but steady pace. Based on our checks we do not expect a sudden surge in conversion of the estimated 35-40 mn analog Phase 3 households onto the digital platform around Dec-15 deadline and hence do not expect digitization to be any immediate near-term catalyst for Dish/Zee. We have
modelled a gradual conversion of analog subs into digital ones and expect most benefits to accrue in FY17.

1) Broadcasters have started advertising on the Phase 3 timeline; 2) MSOs are increasingly focusing on signing up with broadcasters on phase 3 digitization; 3) DTH/MSOs have some inventory of set-top
boxes to sign potential analog consumers and 4) The government is taking regular updates from the stakeholders on the progress of digitization.

In our view, unless we see a “door to door” campaign towards digitization and until analog signals have been disconnected we see risks to timeline slippage for practical implementation of digitization. We remain
uncertain as to whether analog signals could be blacked out post the 31st Dec-15 deadline as we are still unsure of the extent of political support for the implementation (as state governments/local solicitations may come from different parties compared with the central government).