Motilal Oswal report says CAS unlikely to impact Zee Telefilms till 3FY04

MUMBAI:The Motilal Oswal Inquire Indian Equity Research (MOSt Inquire) report dated 20 December 2002 has stated that CAS is unlikely to have any financial impact on Zee Telefilms before 3QFY04 as the first phase would only get completed by December 2003.

Speaking to, Motilal Oswal Securities' Subhabrata Majumder elaborated, "The passage of CAS in the Rajya Sabha will ensure that the longer term impact would be favorable to Zee Telefilms. We have maintained our FY04 estimates and Buy recommendation."

The reasons, Motilal Oswal gives for not changing its position on the Zee stock include: 

? Zee's higher rural bias compared to competitors protects it from any adverse impact on advertising revenues due to possibly low set top box penetration in the metros.

? It is possible that the set top box penetration might show a substantial increase and surprise the sceptics.

? Broadcasters could float a mass general entertainment free-to-air channel to enhance their advertising revenues and to give viewers a laddering option to graduate to their respective pay offerings. (Zee may actually take this route by having a free to air, second run programming channel.)

? Zee is a broadbased player with the viewership of its flagship channel, Zee TV having a higher rural bias than its competitors. The regional language Alpha channels also give it a broader revenue base from the non-metro cities and towns. Therefore, for Zee, the implied share of advertising revenues from the metros would not be more than 20 percent.

In the longer term, with improving penetration of set top boxes, Zee could derive higher pay revenue grow the post-CAS. We maintain our advertising and pay revenue estimates for FY04, till the time the final guidelines are out and reiterate our Buy recommendation.

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