Indian DTH industry poised to grow double by 2013

kramkumar

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The direct-to-home (DTH) industry in India faces issues such as low ARPU and high cost of acquisition of content and subscribers, in addition to various taxes and digitisation of cable.
The direct-to-home (DTH) industry in India, which currently has about 30 million subscribers and six players, is poised to grow to 60 million subscribers by the end of 2013, despite the fact that the industry faces several issues such as low ARPU (average revenue per user), high cost of acquisition of content and subscribers, and various taxes such as entertainment tax and service tax. These aspects, along with the complete digitisation of cable, were some key points that were highlighted at the CASBAA India Satellite Industry Forum held at the Shangri-La in the Capital on March 22.
The panalists at the discussion comprised Sugato Banerji, chief marketing officer, Airtel digital TV, Rajiv Khattar, president, operations, DishTV, Deepak Mathur, vice-president, sales, South and West Asia, SES World Skies, Amit Thukral, principal counsel, legal and regulatory affairs, Tata Sky, and Salil Pitale, executive director, investment banking, Enam Securities. Timmy Khandari, executive director and leader, entertainment and media practice, PricewaterhouseCoopers, moderated the session.

Opening the discussion, Banerji said, "The DTH industry in India is growing fast and in the next two years, will grow further from a subscriber base of 30 million to 60 million. However, it still has to pay a very high price to acquire content from broadcasters, as well as subscribers, when compared to the price paid by the cable operators."

He added that the government should create a level playing field for the cable operators and the DTH operators by completing the digitisation of cable, which so far has been rolled out in certain areas in a few selected metros. Furthermore, the cost of set-top boxes is also declining, which should make digitisaton only simpler. In India, approximately 12 million set-top boxes are sold annually.

Speaking next, Khattar of DishTV said that while it was true that the industry is under pressure due to low ARPU, in the last two years, it has been growing slowly and steadily and now the trend is that the revenue is moving up as consumers have realised that DTH offers better quality and services as compared to cable operators.

Khattar explained, "Unlike cable, in the case of the DTH industry, carriage fee is not a driver of revenue as it contributes only 2-3 per cent of the overall revenue; in fact, various services such as high-definition (HD), targetted advertising, movie-on-demand (MOD), and active services drive business in this industry."

While the DTH industry is working on new ideas, one of its areas of concern has been the availability of sufficient bandwidth, which would allow a DTH operator to telecast more than 500 channels.

Speaking on the issue of bandwidth, Mathur of SES World Skies said, "There is more than sufficient bandwidth available for the DTH industry as companies like ours are working with DTH operators to develop two-three satellites to increase their capacity. For example, currently, we are developing three satellites for DishTV."

Mathur further added, "However, it takes two-to-three years to build and launch a satellite and the cost of production is very high, taking about US$250-350 million. So, while we are working towards ensuring that maximum bandwidth is available for DTH operators, the cost of production makes the process a bit slow."

Thukral of Tata Sky focussed on the issue of taxes. Currently, the industry faces various taxes such as license fee, service tax, entertainment tax and the additional value-added tax levied by certain state governments such as Andhra Pradesh and Madhya Pradesh.

Thukral said that the government should work towards easing certain taxes like license fee, which is 10 per cent of the gross revenue earned, along with entertainment tax. "The DTH industry has a total turnover of Rs 6,000 crore and about 35 per cent of it is paid as tax by the industry. It is about time that the government recognised DTH as a sector similar to any other sector and not as a niche category," he said.

While it is true that the DTH industry is slowly spreading its roots, there is still some time left before the industry turns into a profitable venture. Nevertheless, it seems that investors have recognised the potential of the category.

Pitale of Enam Securities said that the DTH industry has managed to gain a fair amount of interest from equity investors as they feel that the industry will grow in the same pattern as telecom. He said, "Currently, the game is about subscriber acquisition. As soon as the operators move beyond the acquisition mode, it is expected that the industry will be about retaining the consumer base and the game will change from there."

http://www.afaqs.com/news/story.html?sid=30024_Indian+DTH+industry+poised+to+grow+double+by+2013
 
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