Oct 3, 2013

Report on DTH and Cable Network Industry in India

Present Situation of DTH and Cable Network Sector in India.
Brief idea of future prospects of DTH and Cable Network Companies in India
Small Report on  DTH and Cable Network Industry in India.

What we are going to talk about here is about the companies that brings the channels to our TV sets in our houses.
Please note that the content providers are different entities (like Star group, the ZEE group and other small TV channel maker companies also known as broadcasters). Also the DTH that is direct to home are companies that deliver channels to your TV sets by wireless technology i.e. dishes and the Cable Operator Companies (also known as MSO or Multi System Operators) are the companies who deliver channels to your TV Sets via wires/cables.
We will try to cover important points in a point by point manner to understand the basic and present situation of the sector in India and the future prospects of the same.
·         To begin with DTH is only 10 years old sector in India. While Cable Operators are there for more decades now. In the starting STAR TV tried to lauch DTH services in 1995-96 in India but government banned such operations on the ground of security issues. Then the government gave out the first license to DISH TV of ZEE GROUP in 2003 and kick started the regulated sector.
·         Presently there are 7 DTH operators namely, Dish TV, Tata Sky, Reliance Digital, Sun TV, Videocon D2H, Airtel Digital and DD dth.
·         The 7 DTH players have estimatedly put about USD4 billions or Rs.20000 to Rs.25000 crore investment in to the sector.
·         The players have mainly divided markets into rural, semiurban and urban areas.
·         DTH got boost in 2008 with the entry of 4 new players namely Sun, Airtel, Reliance and Videocon.
·         The maximum subscriber base growth was reported between 2007 and 2011 years at 4-5 times in that 4 years.
·         Dish TV is the largest player with over 4 crore subscribers as on march 2013. The subscribers base has risen 10 times in the last 6 years. 60% of its subscribers are in the top 20 cities of the country. Its share of the total Satelite Homes (Cable + DTH) is 30%. However it is still making losses. It is believed by most analysts and this writer as well that this company will act as a bellweather for the sector and when this company will turn profitable, it is most likely that one by one most players will start turning profitable as well.
·         The broadcasters like the DTH players over the cable operators. The broadcasters got Rs.2500 crore as subscription revenues from DTH players in 2012-13 which is 51% of the DTH plus Cable households put together.
·         The DTH players are expected to grab major pie of rural growth in satellite households as they will be fast rather than cable players who will have to make more capex and take time to expand simply because they have to put wires.
·         Presently the growth in subscription revenue of DTH and Cable operators is almost going hand in hand at Rs.2481 crore and Rs.2372 crore respectively for 2011; Rs.3020 and Rs. 2800 crore for 2012; and Rs 3625 crore and Rs.3758 crore respectively for 2013.
·         While the average incremental growth annually is clearly on the side of the DTH players at 1.05 crore. in 2011 vs.that of 26 lakhs of the Cable Operators; 1 crore and 46 lakh respectively in 2012 while 85 lakhs and 18 lakhs respectively in 2013. This is the best indicators to go for DTH guys for high growth expectations, among other factors such as transparency, global expertise, brand image, lower capex, fast penetration and efficient systems.
·         While the picture of ARPU (average revenue per user) paints a different picture but it has its explanations. In 2011 the ARPU growth for DTH players was 190 Rs. while that of Cable Firms was Rs.197 for the year 2011. The figures for 2012 were Rs.190 and 197 respectively for the year 2012 while the figures for 2013 are 197 and 208 for the year 2013. However, these figures should not be too much concerning to a DTH investor as most DTH players entered the show after 2008 and all of them took time to understand the business, implement the technologies and set up organizations functions mainly region wise strategies and marketing. While cable players still enjoyed advantage of having been doing business for several decades and easy penetration within the cities and periphery areas. I believe the ARPU of DTH guys will not take rise until one more decade as the industry will mature during this time and there will be rise in Cable players revenues via the incremental advantage of broadband service which will accrue to cable operators in next couple of years or 5.
·         It is said that the compulsory digitization drive by the government has taken away natural advantage that the DTH companies might have came to use. Now, the Cable players also had to digitize, and give set top boxes compulsorily. Many say that now Cable Operators also giving digital channels, why would one prefer DTH over Cable? The argument is right. But why do such comparision. It is resolved now that digital picture quality is not an issue of competition any more. To add only 15% of the Pay TV subscribers have been covered so far in the fist 2 phases of digitization.
·         About 30% of the incremental DTH customers are taking HD set top boxes. The ARPU for both DTH and Cable players will increase due to subscribers’ preference for HD viewing. This will increase profitability of the sector and rise margins or act as a stabilizer if due to competition some margins are squeezed.
·         The ARPU for DTH players presently is between Rs.160 and Rs.220. Any entry of new big player will only add to threats to this parameter to decline while the Cable guys will sing joyfully on that.
·         According to a study by Hong Kong based research firm Media Partners Asia the present DTH market in India is about 1.5 billion dollars and is expected to touch 3.9 billions by 2017 and 5.3 billion by 2020. These are annual figures. The research further states that the active DTH subscriber base in estimated to grow from 3.24 crore in 2012 to 7.66 crore in 2020 and 6.38 crore in 2017. The report also stated that Dish TV leads the market with 27% of additions in subscriber base. Tata Sky and Airtel Digital TV have 19 and 18% market share respectively.
·         Advantage to Cable Operators: 4G and highspeed internet broadband service offering in near future will be an additional income with cable operators. This benefit is not available to DTH operators. While DTH operators have advantage of corporate culture, brand image, corporate governance (untrust of broadcasters and content developers on cable operators due to lower subscriber base reporting), low capex, benefit of centralize system, internations joint ventures and tie ups, access to large funds and so on.
·         This author believes that the stock prices of DTH players will outperform that of cable operators in the mid to log run. Long term investors should prefer DTH player over cable operators. One can also go for dish tv and siti cable network ltd which are both sister concerns and subsidiary of Zee Group. Do not expect huge return from this sector in the short time. However, investment at every decline in right company’s stock is advisable for exposure in this sector. Also mind that you should keep separate exposure to broadcasters and TV channel firms apart from exposure to operator firms.
·         There are presently 2 listed DTH players namely Dish TV, and Sun TV Network Ltd while there are 6 cable operators listed which are Siti Cable Network Ltd, Den Networks Ltd, Hathway Cable and Datacom Ltd, Hathway Bhawani Cabletel and Datacom Ltd, Sea TV Network Ltd, and Hindjua Ventures Ltd which is the holding company of Indusind Media and Communications Ltd running cable network across india under InCable brand name.
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