Technology

Dish TV's stress areas amid growth

MUMBAI: Dish TV, India’s largest DTH company by volume, has new stress areas in rise in customer drop-out rate and content cost while a narrower loss over five straight quarters has eased the pressure on raising fresh capital.


The company’s programming and content cost is expected to rise by over 17 per cent to around Rs 6.25 billion this fiscal. The expense under this segment includes payout to broadcasters, conditional access system (Cas) and customer support.


The payout to broadcasters for content for the full-fiscal ended March 2011 stood at Rs 4.55 billion. Dish TV feels the content cost will remain within rational limits even as negotiations remain with just one broadcasting company.


“The content cost will continue to land in the region of a 10-12 per cent rise annually. We are not perturbed by it,” said Dish TV chief executive officer RC Venkateish.
 
Media analysts are also concerned about the churn rate, which is showing an upward trend. For the three months ended June 2011, the drop-out rate had climbed to 1.1 per month from 0.9 per cent in the preceding quarter.


“There is a rise in the churn rate after Dish TV increased the price of its set-top boxes. Though the company says this is marginal, it is a matter of concern as it is calculated after the customer stops paying for four straight months,” said an analyst at a broking firm.


Dish TV will have to work on how to lift its ARPU (average revenue per user) that has stayed flat for the quarter at Rs 150. Even if the company takes up measures to address this issue, it looks like the exit ARPU could fall in the region of Rs 160-165 in the best case scenario. Venkateish, however, sticks to the earlier guidance of Rs 160-165 for the fiscal.


Dish TV will have a capital expenditure of Rs 5.50 billion-Rs 6
billion in the current fiscal even as it plans to add 3-3.5 million subscribers. The company is sitting on a cash pile of Rs 3.77 billion and with prospects of turning net positive in the year, there is no fund-raising requirement. 
 
The DTH company has a gross debt of Rs 10.50 billion but the interest burden is expected to soften as it has restructured to foreign currency loans.


Dish TV has earmarked an ad spend of Rs 1.20 billion this fiscal, up from Rs 760 million a year ago. “Though for the first quarter we spent just Rs 150 million, there will be a spike in marketing activity during the year. In a competitive environment where we maintain an incremental market share of 25 per cent, investing in the brand is necessary,” said Venkateish.


The company expects its advertising revenue to grow faster. For the three months ended June 2011, it earned Rs 15 million from advertising, same as the trailing quarter. “We will see substantial improvement in advertising revenue this year,” said Venkateish.


Dish TV‘s carriage revenue, however, will see muted growth this year. “We made around Rs 270 million from carriage. We don’t see much growth in this,” averred Venkateish.


Dish TV’s net loss narrowed to Rs 183 million, compared with Rs 371 million in the preceding quarter, while operating revenue grew 6.3 per cent to Rs 4.60 billion.

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