JitendraKumar
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The stock of DTH (direct to home) operator, Dish
TV India has fallen 19 per cent so far this year.
Flat average revenue per user (ARPU) and the
relatively lower subscriber addition in the
December 2015 quarter compared with the same
period last year, seems to have weighed down
the stock. Thanks to a subdued increase in
expenses though, Dish TV posted profit at the
net level in the latest quarter versus loss in the
year-ago period.
Higher revenue along with a check on operating
costs helped the company post profit at the net
level in 2014-15, the first time since its debut in
the capital-intensive DTH market in 2003. In
2015-16 too, it has posted profit in all three
quarters, compared with loss in the year-ago
periods.
At ₹83, the stock trades at an EV/EBIDTA
(enterprise value to operating profit) multiple of
13 times its trailing 12-month earnings. This is
lower than the five-year historical average of
about 17 times.
Dish TV is well placed to expand its subscriber
base as more areas get covered under the
ongoing cable TV digitisation (phase III and
Phase IV). It is in a sweet spot on the
programming and content cost fronts too, given
its strong bargaining position with broadcasters.
It can hope for some tax relief too. Investors
with a long-term perspective can buy the stock.
Expanding reach
Of India’s 168 million households with a TV,
analog cable subscribers account for a little over
half the market. The remaining comprisesDTH
(28 per cent) and digital cable subscribers (20
per cent). According to the company, it enjoys
25-26 per cent share in the DTH market.
The initial phases of digitisation covered the four
metros and 38 large cities. With the ongoing
digitisation, the market for digital TV distribution
— which comprises digital cable operators and
DTH operators — will expand further. Given their
technology advantage over digital cable
operators, DTH players are expected to garner a
larger share here.
Given its large market share, Dish TV is well
positioned to grow its subscriber base; it has
done so in the past too; the number rose from
10.7 million in 2012-13 to 14 million by end-
December 2015. Zing, a regional channel
offering, launched by Dish TV last year to cater
to customers in smaller towns has been
contributing about 20 per cent of the company’s
additional subscribers every quarter.
While Dish TV has been adding subscribers, its
ARPU has not grown much. It has been within
the ₹162-173 range over the past several
quarters. This is despite the company increasing
its higher-ARPU high definition (HD) subscribers;
the lower ARPU from the Zing subscribers is
averaging out the increase.
The company, however, expects its overall ARPU
to improve gradually overtime as subscribers
gradually upgrade from the standard definition
(SD) channel packages to the HD packages. Dish
TV posted net profit of ₹210 crore for the nine
months ended December 2015 compared with a
loss of ₹32 crore in the same period last year.
A sharp rise in revenue (up 15 per cent year-on-
year) even as operating expenses inched up
moderately (up 3.7 per cent year-on-year),
helped the company report 49 per cent increase
in operating profit to ₹758 crore during the latest
nine-month period. But, high fixed costs took
away a chunk of the operating profit.
Dish TV’s programming and content costs (40
per cent of operating expenses) are expected to
grow at single-digit rate, given the company’s
strong bargaining position with broadcasters,
thanks to its large market share. The lower
content cost in the phase III and IV digitisation
areas too should help.
As on September 2015 Dish TV had a debt of
₹772 crore on its books but this has been
brought down by ₹300 crore since then. The
interest coverage ratio too has improved — from
0.8 times in the year-ago period to 2.3 times for
the nine months ended December 2015.
Regulatory relief expected
There has been some relief in licence fee too.
With subscription revenue being reported net of
commission charges and transfer of the non-core
business to Dish Infra Services, a subsidiary, the
annual licence fee is being applied on a lower
base.
There could be further relief if TRAI’s
recommendation of 8 per cent licence fee on
gross adjusted revenue (adjusted for the
entertainment tax paid) instead of the current 10
per cent on gross revenue, is accepted. A shift
to GST from the multiplicity of taxes too should
be beneficial.
Dish TV India: Adding to the Zing: The Hindu Business Line - Mobile edition
TV India has fallen 19 per cent so far this year.
Flat average revenue per user (ARPU) and the
relatively lower subscriber addition in the
December 2015 quarter compared with the same
period last year, seems to have weighed down
the stock. Thanks to a subdued increase in
expenses though, Dish TV posted profit at the
net level in the latest quarter versus loss in the
year-ago period.
Higher revenue along with a check on operating
costs helped the company post profit at the net
level in 2014-15, the first time since its debut in
the capital-intensive DTH market in 2003. In
2015-16 too, it has posted profit in all three
quarters, compared with loss in the year-ago
periods.
At ₹83, the stock trades at an EV/EBIDTA
(enterprise value to operating profit) multiple of
13 times its trailing 12-month earnings. This is
lower than the five-year historical average of
about 17 times.
Dish TV is well placed to expand its subscriber
base as more areas get covered under the
ongoing cable TV digitisation (phase III and
Phase IV). It is in a sweet spot on the
programming and content cost fronts too, given
its strong bargaining position with broadcasters.
It can hope for some tax relief too. Investors
with a long-term perspective can buy the stock.
Expanding reach
Of India’s 168 million households with a TV,
analog cable subscribers account for a little over
half the market. The remaining comprisesDTH
(28 per cent) and digital cable subscribers (20
per cent). According to the company, it enjoys
25-26 per cent share in the DTH market.
The initial phases of digitisation covered the four
metros and 38 large cities. With the ongoing
digitisation, the market for digital TV distribution
— which comprises digital cable operators and
DTH operators — will expand further. Given their
technology advantage over digital cable
operators, DTH players are expected to garner a
larger share here.
Given its large market share, Dish TV is well
positioned to grow its subscriber base; it has
done so in the past too; the number rose from
10.7 million in 2012-13 to 14 million by end-
December 2015. Zing, a regional channel
offering, launched by Dish TV last year to cater
to customers in smaller towns has been
contributing about 20 per cent of the company’s
additional subscribers every quarter.
While Dish TV has been adding subscribers, its
ARPU has not grown much. It has been within
the ₹162-173 range over the past several
quarters. This is despite the company increasing
its higher-ARPU high definition (HD) subscribers;
the lower ARPU from the Zing subscribers is
averaging out the increase.
The company, however, expects its overall ARPU
to improve gradually overtime as subscribers
gradually upgrade from the standard definition
(SD) channel packages to the HD packages. Dish
TV posted net profit of ₹210 crore for the nine
months ended December 2015 compared with a
loss of ₹32 crore in the same period last year.
A sharp rise in revenue (up 15 per cent year-on-
year) even as operating expenses inched up
moderately (up 3.7 per cent year-on-year),
helped the company report 49 per cent increase
in operating profit to ₹758 crore during the latest
nine-month period. But, high fixed costs took
away a chunk of the operating profit.
Dish TV’s programming and content costs (40
per cent of operating expenses) are expected to
grow at single-digit rate, given the company’s
strong bargaining position with broadcasters,
thanks to its large market share. The lower
content cost in the phase III and IV digitisation
areas too should help.
As on September 2015 Dish TV had a debt of
₹772 crore on its books but this has been
brought down by ₹300 crore since then. The
interest coverage ratio too has improved — from
0.8 times in the year-ago period to 2.3 times for
the nine months ended December 2015.
Regulatory relief expected
There has been some relief in licence fee too.
With subscription revenue being reported net of
commission charges and transfer of the non-core
business to Dish Infra Services, a subsidiary, the
annual licence fee is being applied on a lower
base.
There could be further relief if TRAI’s
recommendation of 8 per cent licence fee on
gross adjusted revenue (adjusted for the
entertainment tax paid) instead of the current 10
per cent on gross revenue, is accepted. A shift
to GST from the multiplicity of taxes too should
be beneficial.
Dish TV India: Adding to the Zing: The Hindu Business Line - Mobile edition
