's Perspectives

Star power say Tata to Zee's Dish, DD?

(Posted on 10 March 2004)

The Rupert Murdoch-controlled Star Group has always been bullish on DTH in India. In 1997, the bullishness had got them into trouble as the then government had banned reception of KU-band signals (over 4800 MHz) just to spite Star India that was bombarding the media with information on its DTH plans.

The situation has undergone a change in the sense that this time round. Star has kept a low profile on its proposed DTH venture. Rather, the media has almost been blocked off on information on its DTH forays or prospective Indian partners. But the business eagerness still remains. It is apparent in
what Star Group's new CEO Michelle Guthrie, who took over from James Murdoch last November, feels about the potential of DTH in India.

Star Group's CEO Michelle Guthrie

In an interview given to the Hong Kong-based Television Asia magazine, Gutherie said that Star's Indian DTH platform is a priority, as is "getting paid for the subs (subscribers) we aren't getting paid for."

Attempts by to elicit an official response from either majority partner (80 per cent) the Tata Group or Star itself as to what is being served up on the DTH plate have drawn a blank thus far. However, informed sources have provided some details as to just what's cooking.

Pricing is what can make or break a service provider in a market as sensitive as India and this is an issue that is getting a lot of attention.

A customer who takes the full DTH offering of 80 channels is likely to end up paying Rs 400 on an average. As far as the total hardware for installing DTH is concerned, it would be just under Rs 5,000, the sources say. This includes installation costs as well. There is no indication, as of now, that the box is going to be given away free, which was the route Murdoch took for BSkyB in the UK.

Current indications are also that the Star-Tata DTH packages will not be uniformly priced but will vary from region to region. While in South India, the basic tier is expected to cost around Rs 200, this may not be the price a customer pays for the same tier in another region. This is because Tata-Star expect different levels of penetration in different areas.

In Mumbai for instance, even though demand is expected to be high, there are technical problems that are likely inhibit penetration. The biggest stumbling block being the highly congested layout of Mumbai. With most buildings and colonies in the metropolis stacked up "cheek-by-jowl", it is no straightforward task to position a potential customer's DTH dish antenna where it can receive signals without obstruction. Except for the really upmarket localities in the city, most areas are likely to face such difficulties.

One point is still unclear about, is whether the proposed DTH service would be launched under the brand name of Space TV, the company that had earlier applied for a license and had also managed to obtain a letter of intent from the Indian government, despite several question marks against the company's shareholding pattern that flouted the guidelines.

There is also no official communication available whether the new 80:20 joint venture has paid the Rs 100 million bank guarantee, as stipulated in the DTH guidelines, to the government though the buzz in the information and
broadcasting ministry indicates that this has been done. All that was forthcoming from the Tatas, the majority shareholder in the DTH venture, was that "when there is something to be communicated officially, the media would be intimated about it." Similar is the stand that Star is taking as well.

According to Star's projections, when a business proposal was made over 18 months back, the target would be to acquire about five million subscribers in about a decade's time.

This plan may undergo some change considering that some in the company now believe that the growth in the number of DTH subscribers in India may be faster than other places where DTH is a fairly established service.

Why? A DTH service in India may outstrip conservative estimates because of the lack of digital terrestrial service in India and seemingly plateauing off of cable TV's growth in Asia-pacific, including India.

Though MPA estimates that in India a DTH service would manage to acquire approximately seven million subscribers in 10 years' time, a senior Star executive, on condition of anonymity, hinted that if properly marketed, a subscriber base of 10 million could be targeted in five years time. Do the Tatas agree? The group is said to be still firming up its numbers on DTH.

A typical DTH operation is estimated to cost between $ 400-500 million, but, according to information available, the Indian DTH project has been calculated to cost between $250-$300 million by Star. The project's business angles are said to have been vetted by Ernst & Young for the Tatas.

Again, according to information available, the debt-equity ratio of the DTH venture is likely to be 1:1, which may change a little when the project actually gets off the ground. The paid-up capital of the DTH joint venture would be approximately Rs 8 billion.

The service was slated to be launched by Christmas time by the Tata-Star combine. But now with CAS being put off by the government, on recommendations from the broadcast and cable regulator, Trai, the duo look to be thinking of advancing the launch date. To even before Diwali, some say.

It would help Star to tap additional subscription revenue and also take advantage of the part conditioning of people in the metros at least for paying for watching TV channels.

Where Star-Tata combine has an advantage is that the DTH project can draw on the experience of BSkyB to go in for unique and more effective marketing of the service like subsidizing of set-top boxes heavily.

Dwelling on the drivers for a DTH service, MPA's Couto points out that aggressive subscriber acquisition is driven by STB subsidies (partial or in BSkyB's case full subsidy); premium and differentiated content (sometimes exclusive such as Premier League Soccer on Sky in the UK), intelligent packaging and tiering (simple but gives people a lot of choice and makes it affordable); customer service and marketing and, of course, deep pockets and the ability to absorb long term cash flow losses. "Two billion pounds were invested in BSkyB, for instance," he adds.

Yes, it's the financial muscle of Murdoch and the Tatas that can give a tough time to Chandra and his Dish TV. But it would be interesting to see which of the three players manage to beam more direct and easily into Indian consumers' homes.

Also read:
What's cooking on Dish TV?
The International Scenario
FAQs regarding DTH






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