Mandatory digitisation in the four metros opens up a potential market of six million analog cable homes that have to be digital by June 30, this year. This is the time all DTH operators should be making a killing. Just 90 days before the metros have to go digital, Harit Nagpal, managing director and CEO Tata-Sky and president of the DTH Operators Association of India spoke to Vanita Kohli-Khandekar on the challenges. Excerpts:
Why raise the issue of taxation now?
In the Budget the negative list for service tax includes, admission to entertainment events or amusement facilities. This is based on form of payment and not on the activity, which is entertainment. So, while multiplexes, dance bars or theatres are exempt, DTH is not. In an earlier case between a DTH operator and the state of Delhi, the court had said that a DTH service is just like multiplexes. So, it is entertainment.
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Our whole contention to the government has been ‘please remove the double taxation on DTH’. We pay service tax (a central subject) and entertainment tax (a state subject). Plus there is a licence fee of 10 per cent. The average burden of tax on DTH is 30 per cent and on digital cable it is 20 per cent. If you take into account under-declaration, then cable pays an average of four per cent in taxes.
If the costs are an issue why not push up prices?
DTH and digital cable operators have to benchmark themselves against analog cable, which is not paying taxes and not giving broadcasters their share. Since my pricing is based on theirs it is not reflective of my cost structure. Similarly, their (analog cable’s) profit & loss statement doesn’t reflect the full impact of taxes and costs. However, the day their cost structure is similar to mine, is when it will be a level playing field. That will happen with digitisation. Then there is bound to be price rationalisation. The (DTH) industry has put in $4 billion (Rs 20,000 crore). At the current cost and pricing structure there is no hope of recovering it till we put in another $4 billion. So, my request would be please don’t delay digitisation. Our growth is predicated on it.
How many subscribers do you think DTH could get if cable cannot meet the June 30 deadline?
We are prepared for the maximum. We are assuming that all will come to DTH. If cable guys believe that it can’t happen let them not hold this movement to ransom. DTH guys are prepared with boxes, trained manpower. We can cover every household in the shortest possible time because we have a national infrastructure. We can divert boxes to cities that have a deadline to meet.
What can stop it?
We have made a fantastic plan (for digitisation). But do you have an execution mechanism. If someone in Gorakhpur (for example) is still selling analog signals, how will you stop them? The customer needs to be 100 per cent sure that you will ensure enforcement. The TV has to go blank. On June 30 what kind of action will you take if it is still analog?
The talk is that Tata-Sky cannot gain from mandatory digitisation because of bandwidth constraints.
Bandwidth is not a constraint for acquiring consumers; it is a constraint only for offering more channels. Who is acquiring the maximum subscribers? We are. Just because we are not listed doesn’t mean that our numbers are not growing. We are currently between 8.5-9 million subscribers. (That puts Tata-Sky at number two after Dish TV).
http://http://www.business-standard.com/india/news/our-growth-dependsdigitisation-harit-nagpal-/468863/
Why raise the issue of taxation now?
In the Budget the negative list for service tax includes, admission to entertainment events or amusement facilities. This is based on form of payment and not on the activity, which is entertainment. So, while multiplexes, dance bars or theatres are exempt, DTH is not. In an earlier case between a DTH operator and the state of Delhi, the court had said that a DTH service is just like multiplexes. So, it is entertainment.
Click here for Cloud Computing
Also Read
Related Stories
News Now
- Nod to digitise TV broadcast by '14
- Q&A: Harit Nagpal, MD & CEO, Tata Sky
- The Bandra boy in the news business
- A battle is brewing in your living room
- Q&A: Vikram Kaushik, CEO, Tata Sky
- Harit Nagpal to join Tata Sky as MD
Our whole contention to the government has been ‘please remove the double taxation on DTH’. We pay service tax (a central subject) and entertainment tax (a state subject). Plus there is a licence fee of 10 per cent. The average burden of tax on DTH is 30 per cent and on digital cable it is 20 per cent. If you take into account under-declaration, then cable pays an average of four per cent in taxes.
If the costs are an issue why not push up prices?
DTH and digital cable operators have to benchmark themselves against analog cable, which is not paying taxes and not giving broadcasters their share. Since my pricing is based on theirs it is not reflective of my cost structure. Similarly, their (analog cable’s) profit & loss statement doesn’t reflect the full impact of taxes and costs. However, the day their cost structure is similar to mine, is when it will be a level playing field. That will happen with digitisation. Then there is bound to be price rationalisation. The (DTH) industry has put in $4 billion (Rs 20,000 crore). At the current cost and pricing structure there is no hope of recovering it till we put in another $4 billion. So, my request would be please don’t delay digitisation. Our growth is predicated on it.
How many subscribers do you think DTH could get if cable cannot meet the June 30 deadline?
We are prepared for the maximum. We are assuming that all will come to DTH. If cable guys believe that it can’t happen let them not hold this movement to ransom. DTH guys are prepared with boxes, trained manpower. We can cover every household in the shortest possible time because we have a national infrastructure. We can divert boxes to cities that have a deadline to meet.
What can stop it?
We have made a fantastic plan (for digitisation). But do you have an execution mechanism. If someone in Gorakhpur (for example) is still selling analog signals, how will you stop them? The customer needs to be 100 per cent sure that you will ensure enforcement. The TV has to go blank. On June 30 what kind of action will you take if it is still analog?
The talk is that Tata-Sky cannot gain from mandatory digitisation because of bandwidth constraints.
Bandwidth is not a constraint for acquiring consumers; it is a constraint only for offering more channels. Who is acquiring the maximum subscribers? We are. Just because we are not listed doesn’t mean that our numbers are not growing. We are currently between 8.5-9 million subscribers. (That puts Tata-Sky at number two after Dish TV).
http://http://www.business-standard.com/india/news/our-growth-dependsdigitisation-harit-nagpal-/468863/
