Scaling the broadcast net

We expect increases in TV penetration and rising income levels to drive growth for the DTH subscriber base in India, which should increase to 50MM by 2013 from 24MM currently. Dish TV is well positioned to capture a large part of this growth given its strong brand and deep distribution reach across c. 6,600 towns. We forecast Dish TV’s gross subscriber base to increase from 6.9MM in FY10 to 13.8MM by FY13E. In addition, competitive intensity is easing, which should aid ARPU expansion and lower costs.

Dish TV’s subscriber base has reached a critical scale and new subscriber additions as a percentage of mature subscribers is declining.

While Dish TV had an early mover advantage, being able to obtain a DTH license in 2004, competitive intensity picked up with entry of Tata-Sky in 2006 and subsequently intensified with entry of Sun, Big TV, Bharti-Airtel and Videocon between 2007 and 2009. As a result, ARPUs and market share for DISH came under pressure. Recent industry trends suggest that competitive intensity is now easing and players are incrementally becoming more rational. This is evidenced by the relative stability in Dish TV’s ARPUs and moderation in consumer acquisition costs over the last 4 quarters.

Reliance DTH Under Loss

Reliance Communications which has been silent on giving out numbers on the performance of its subsidiaries [Reliance Big TV DTH] had to disclose its Accounts when we demanded through the Ministry of Corporate Affairs.

Reliance big TV DTH business generated revenue and net loss of Rs1.1b and Rs0.8b respectively over an asset base of Rs3.4b.

RITL's revenue and net profit were Rs49.3b and Rs16.9b respect. over an asset base of Rs207.6b

Sun Direct TV inks deal with IBM

Chennai-based Sun Direct TV, part of the Sun TV Group, has inked agreement with IBM to employ and manage Customer Relationship Management (CRM) related applications for Sun Direct TV.

Being the multi-year deal, it comprises end-to-end services ranging from strategy through implementation, and displaces Sun Microsystems, the incumbent provider.

Launched in December 2007, Sun Direct TV presently has a base of 3 million subscribers. The company expects to expand its customer base to 10 million by 2010 with implementation of this CRM platform.

The CRM platform will help Sun Direct TV to tackle key issues surrounding billing, customer relationship management and develop ways to get better insights on customer behaviour. IBM will develop and maintain a dynamic infrastructure for Sun Direct TV.

Dish TV rises despite hike in tariff rates

Part of Essel Group, Dish TV India has announced to increase its tariff plans by Rs 100 across India. The move comes after Government's imposition of 5% custom duty on import of set top boxes proposed in current budget.

The hike in custom duty has led a rise in input cost of set top boxes. The business model of DTH is based on subsidy and the component cost has surged considerably due to the increase in dollar exchange rate in the last one year.

Company’s set top box which was priced at Rs 1490 will now cost Rs 1,590. Similarly under its combo offer of Rs 2090 plus 3 months platinum/south platinum, will now cost Rs 2,190, whereas its others 'Ultimate sports bonanza' of Rs 1,790 and Rs 2,300 each will be available at Rs 1,890 and Rs 2,490 respectively.

DTH industry wants duty free import of set top boxes

The direct-to-home (DTH) industry is demanding a duty free regime for imported set top boxes as the industry feels that import duties on these are resulting in increase in cost being borne by the consumer and hence slowing the pace of expansion of the industry. A similar demand has also been made by the cable TV industry.

Economists argue that such a move will have a positive impact on government’s revenue on a net basis as reduction in cost of installation will increase business in both the DTH as well as the cable segment.

Even the information and broadcasting ministry (I&B) has argued that it is in the government’s own financial interest to eliminate all import duties for at least the next five years on digital set top boxes for both cable and direct-to-home segments. The ministry has raised the issue before the finance ministry in the pre-budget consultations which are currently going on for the Union budget for FY10.

At present, imported digital set top boxes attract a special additional duty at the rate of 4% as well as a countervailing duty at 8%. Together these two raises the cost of set top boxes by 12%. The I&B ministry feels that both the duties should be cut for the next five years which will help boost growth of the industry.