Tata Sky FY'12 loss narrows to Rs 2.98 bn on expanding subscriber base

MUMBAI: For Tata Sky, a joint venture of Tata Sons and Rupert Murdoch‘s Star TV, the turnaround story is not far away. The DTH television services provider has narrowed its net loss in the year ended 31 March 2012 from a year earlier, on increasing subscriber numbers.

Tata Sky’s net loss in 2011-12 was Rs 2.98 billion, 36 per cent less than Rs 4.7 billion a year earlier. The company, privately held, does not disclose its financials.

The company‘s net sales were up 18 per cent to Rs 15.9 billion from Rs 13.5 billion a year earlier.

The company‘s net loss in 2009-10 was Rs 6.26 billion on total income of Rs 11.10 billion.
The continuing losses have resulted in piling up of accumulated losses. Tata Sky‘s accumulated losses as on 31 March 2012 would amount to Rs 43.03 billion with the addition of loss in 2011-12 to the accumulated losses of Rs 40.05 billion as on 31 March 2011.

Tata Sky’s current subscriber base, according to industry estimates, is around 10 million, up from around 8.5 million in the previous fiscal.

The company is raising Rs 1.6 billion through issue of five-year non-convertible debentures, amid increased sales effort in the four metros where carriage of all television channels will be shifted to digital mode from the current analogue from 1 November.

This will add to the company’s debt (loans and other facilities from banks) of Rs 17.01 billion.

The debenture issue has been rated A/Stable by ratings agency CRISIL. In its ratings rationale, CRISIL said Tata Sky will continue to invest in expanding its subscriber base over medium to long term. Tata Sky’s financial risk profile, marked by poor debt protection metrics, is expected to remain weak, given its large accumulated losses.

CRISIL ratings continue to reflect the financial and managerial support Tata Sky receives from its majority shareholder, Tata Sons Ltd.

The ratings also factor in Tata Sky’s healthy revenue growth, driven by an increasing subscriber base in the DTH market. These rating strengths are partially offset by Tata Sky’s exposure to intense industry competition, and the company’s significant establishment and operating expenses, resulting in large losses, and weak financial risk profile.

Dish TV is the market leader in DTH services, followed by Tata Sky and Airtel Digital. The other private DTH service providers are Sun Direct, Videocon d2h and Big TV.

CRISIL, however, believes that Tata Sky will continue to benefit from managerial and financial support from Tata Sons and funding support from other shareholders. The outlook may be revised to ‘Positive’ if Tata Sky increases its subscriber base and average revenue per user (ARPU) to more-than-expected levels, or achieves break-even earlier than expected. Conversely, the outlook may be revised to ‘Negative’ if Tata Sky continues to incur losses for a period longer than expected, faces delays in achieving break-even, or suffers from adverse regulatory changes, the ratings agency said.

Tata Sky (formerly Space TV Ltd) commenced operations in 2004 as 80:20 joint venture between Tata Sons and National Digital Distribution Services FZ LLC (NDDS), owned by Newscorp of the Star Network group. In 2007-08, Bay Tree Investments (Mauritius) Pte Ltd (Bay Tree), part of Temasek Holdings (owned by the Ministry of Finance, Singapore), acquired 10 per cent of Tata Sky’s equity shares. As on March 31 2012, Tata Sons owned 60 per cent of Tata Sky, NDDS (News Corp) 30 per cent, and Bay Tree (directly/indirectly) 10 per cent. Tata Sky commenced DTH operations in August 2006.

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