Status Report: Q3-2016: DAS Phase III deadline no great shakes for DTH industry

BENGALURU: Contrary to expectations that the sunset date of 31 December, 2015 (Q3-2016 in financial terms in India) would rake in good numbers for the DTH industry for the quarter ended 31 December, 2015 (Q3-2015, current quarter), results declared by three of the seven players in the country show not much of a change.

Refer to Fig A below, which shows a quarter-on-quarter change in subscriber numbers. Though Airtel DTH and Videocon d2h have both shown a small spike in subscriber additions between Q2-2016 and Q3-2016, overall taking the combined addition in subscription numbers by all the three, the change was just 3.59 per cent. In the case of the third player - Dish TV, it witnessed the lowest growth over a five quarter period starting Q3-2015 until the current quarter at 2.19 per cent

Note: (1)100,00,000 = 100 lakh = 10 million = 1 crore.

(2) This report covers only the three of the seven DTH service providers in India (as had the previous two reports) since the other four – Reliance Digital TV, Sun Direct (about 97 lakh subscribers as on 31 March, 2015), Tata Sky and DD Free Dish are not listed directly on the bourses and their financial numbers are not available, unless the principals of these companies/segments chose to reveal them. The three players – Airtel DTH, Dish TV and Videocon d2h have already been covered in our earlier reports.

(3) Some of the players mention their financial as well as subscription numbers in millions in their financial reports/investor presentations and other documents that they make available publicly. The financial numbers have been converted to Rs crore and subscription number to lakh to an approximation, and percentages have been mentioned to the second decimal place approximation.

(4) There could be some ambiguity about the market share of the three players. If one were to go by the latest numbers released by the Telecom Regulatory Authority of India (TRAI) in February 2016 for September 2015. TRAI’s indicator report says that the number of registered DTH subscribers as on 30 September, 2015 was 814.7 lakh. The combined subscription numbers of the three players as on the same day as reported by them individually was 351.16 lakh and hence the market share of these players works out to 43.10 per cent. However, TRAI’s report also says that the number of active DTH subscribers as on 30 September, 2015 was 410.5 lakh. Based on the second TRAI number, the combined total subscriber market share of the three players in this paper works out to 85.54 per cent. Though, the combined share of subscribers of the three players has declined between Q1-2016 and Q2-2016, based on TRAI numbers, the author contends that it is safe to assume that the three players have more than 50 per cent market share in India in terms of subscribers.

(5) Videocon d2h EBIDTA numbers are adjusted.

Although in absolute numbers, Q3-2016 saw probably the highest subscriber additions by the three players per quarter over the past few quarters, in percentage terms it was slightly lower at 3.59 per cent in the current quarter as compared to 3.62 per cent in Q1-2016. Overall, the three players in this report have mentioned a combined net addition of 12.6 lakh subscribers in Q3-2016. In Q1-2016, the three had reported a combined net addition of 11.99 lakh subscribers.

Dish TV managing director Jawahar Goel said, “We continued to build our pan-India reach during the quarter. However, as expected, despite analogue sunset there was no real spike in consumer demand from Phase III markets thus making it an ordinary quarter from that perspective. Later, changing gears to align with the current industry trend, we tweaked our subscription packages to a more versatile and seemingly economical offering. Mandatory digitisation however is expected to pick up speed and our key focus going forward would be to gain market share both in terms of subscribers and profitability.”

Of the three, Airtel DTH added the highest number of subscribers in Q3-2016, about six lakh subscribers. Further, among the three players, Dish TV has the largest subscriber base – about 140 lakh, followed by Videocon d2h with 112.7 lakh and Airtel DTH with 111.06 lakh subscribers. In terms of revenue, it is Dish TV that leads with the highest revenue, followed by Airtel DTH, with Videocon d2h among the 3 players in this report.

Please refer to the figure below. Panel A indicates the combined numbers of the three players, Panels B, C and D indicate the playout of revenue, EBIDTA and subscription base for Airtel DTH, Dish TV and Videocon d2h respectively, panel E indicates ARPU and panel F monthly subscriber churn.

Please refer to Panel A in the graphs above. The combined revenues of the three players in the current quarter grew 17.24 per cent year on year (YoY) to Rs 2,245.17 crore from Rs Rs 1,915.01 crore and grew 4.46 per cent quarter on quarter (QoQ) as compared to Rs 2149.32 crore. EBIDTA increased 41.35 per cent YoY in Q3-2016 to Rs 710.51 crore (31.65 per cent margin) from Rs 503.65 crore (26.25 per cent margin) and grew 4.44 per cent QoQ from Rs 680.30 crore (31.65 per cent margin). Reported Combined Subscription numbers in Q2-2016 grew 13.22 per cent YoY to 363.76 lakh from 321.3 lakh and grew 3.59 per cent QoQ from 351.16 lakh.

Please refer to panel F above. All the three players have reported a monthly subscriber churn of around 0.7 per cent in the current quarter, as compared to a high of 1.3 per cent in Q2-2016.

Airtel DTH

Airtel’s DTH segment contributes about four per cent to the telecom giant’s overall revenue. Revenue for the DTH segment in Q3-2016 increased 19 per cent to Rs 742.2 crore, up 19 per cent YoY as compared to Rs 623.4 crore. EBIDTA for Q3-2016 grew 45 per cent to Rs 247.4 crore (33.3 per cent margin) as compared to Rs 170.7 crore (27.4 per cent margin).

The segment’s subscriber base grew 13.2 per cent YoY to 111.06 lakh in the current quarter as compared to 98.10 lakh and grew five per cent as compared to 105.76 lakh in the immediate preceding quarter. Though in US dollar terms, average revenue per user (ARPU) was constant YoY and QoQ at $3.5, it has increased seven per cent YoY in Indian rupees to Rs 229 from Rs 214 and increased two per cent QoQ from Rs 224.

Dish TV

Dish TV added 3.17 lakh net subscribers (the least among the three) in the quarter ended 31 December, 2015 (Q3-2016, current quarter), taking its subscriber base on that date to 140 lakh. Dish TV is the largest DTH player in the country in terms of subscribers as well as revenue. The company reported 11.8 per cent YOY revenue growth in the current quarter at Rs 771.48 crore as compared to Rs 690.08 crore and 2.5 per cent more QoQ as compared to Rs 752.42 crore.

The company reported 39.1 per cent EBIDTA growth in the current quarter at Rs 265.4 crore as compared to Rs 190.8 crore in the corresponding year ago quarter and 4.1 per cent more than the Rs 255 crore in the immediate trailing quarter. Dish TV reported PAT in Q3-2016 at Rs 68.49 as compared to a loss of Rs 2.63 crore in the corresponding prior year quarter, but a decline of 21.3 per cent as compared to Rs 86.96 crore in the previous quarter.

ARPU in the current quarter declined by Rs 5 YoY to Rs 172, but increased by Rs 1 QoQ.

Videocon d2h

Videocon d2h added 6.7 lakh gross subscribers and 4.3 lakh net subscribers during the quarter. Gross subscribers totalled 149.5 lakh and net subscribers totalled 112.7 lakh as of 31 December, 2015.

The company’s revenue from operations (TIO) increased 21.6 per cent YoY to Rs 731.49 crore in Q3-2016 as compared to Rs 601.53 crore, and increased six per cent QoQ from Rs 690.08 crore.

Videocon d2h reported 42.2 per cent YoY growth in adjusted EBITDA at Rs 201 crore for Q3- 2016 compared to Rs 141 crore in the corresponding year ago quarter. Net loss for the quarter declined to Rs 22.05 crore as compared to the net loss of Rs 79.8 crore in Q3-2015.

ARPU in Q3-2016 increased 8.2 per cent to Rs 211 as compared to Rs 195 in Q3-2015 and increased 2.9 per cent as compared to Rs 205 in Q2-2016.

Closing remarks

Dish TV, which is more of a value player when compared to the other two players in this report, which could be labelled a premium players in terms of subscription packages, could show even better results in terms of better subscriber acquisition and hence higher revenues over the next few quarters, considering the fact that it is tweaking its subscription packages to be more economical.

Videocon d2h executive chairman Saurabh Dhoot said, “In the first few days of January 2016, we saw strong pick up in subscriber additions in cities that come under Phase III digitisation. Recently, a few state high courts issued a stay order on implementation of Phase III digitisation for one to three months. This was in line with our expectations of the digitisation being a staggered process.”

“We estimate around 50 million television homes come under Phase III digitisation, of which 24-25 million television homes are already on the digital platform. Thus, the target market under Phase III digitisation is the remaining 25-26 million television homes that are currently on analogue cable,” added Dhoot.

Investors in Indian DTH companies could heave a sigh of relief – Chrome figures recently released for the month of January 2016 reveal that the DTH industry is a major beneficiary of DAS phase III. If that is the case, then DTH players should report even better numbers for Q4-2016 and FY-2016. Another heartening revelation was made by Sun TV Network Limited (Sun TV) in its earnings release for Q3-2016. Sun TV says that its DTH business under the brand Sun Direct, revenue was up approximately 14 per cent. Subsidy costs for DTH set top boxes is going down, and that should help with improved bottom lines.

Going on to 31 December, 2016, the sunset date for DAS IV, the DTH platform should be able to garner a big chunk of subscribers from DAS IV areas. The future seems good, let’s see how it plays out from the DTH industry’s perspective.

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