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Funding drying up for DTH and MSOs

Indiantelevision.com Team

(1 October 2008 9:30 pm)

NEW DELHI: Speakers at a session on 'Calibrating the Digital World' were clear that too many licences had been issued for direct-to-home and three players were more than enough for the entire country.

Furthermore, while they were clear that investments and funding would ultimately come down, they felt that competition was good for any country and DTH had a bright future in India.

Chrys Capital managing director Brahmal Vasudevan said it was clear that access to capital and bank funding was becoming increasingly difficult. But with increasing competition, some consolidation was bound to come in at some stage, he felt.

He said he felt that despite the large number of DTH licences being issued, only two or three would be left in the field within the next few years and the others would not be able to face up to the competition. He said that some of them were already experiencing difficulties. He said it was estimated that DTH players would have to face losses of up to 600 million dollars before breaking even. Similarly, he said consolidation was beginning to happen in the cable industry. The government must formulate policies that help cable operators to make some money.

He welcomed the proposal of establishment of a National Digital Fund to help the industry. He said a sum of around six billion dollars were required for digitalization all over the country, and that was a huge sum by any standard. For that reason alone, he was sure more than half the country will remain on analogue mode.

Mr Sander Hamersma, Director of Investment Banking and Debt Capital Markets for Barclays Capital, said with most viewers going in for either cable or DTH, a third technology like IPTV or HITS would find it very difficult to get even. He said funding was drying up and this would make growth difficult unless the government comes forward with another alternative. Similarly, competition was leading to consolidation as many found it difficult to survive.

Co-Head of Institutional Equities in Kotak Securities Sanjeev Prasad said the Zee-owned Dish TV was expected to break even in 2011 and others may take even longer. With 'a price race to the bottom and every player reducing prices to beat the competition', profitability was becoming even more difficult. But he wondered how low could DTH players go.

He felt that a channel could only run if it was able to sustain in content, distribution and marketing. He was referring to a question about the success achieved by the new channels like 'Colors'.