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The growth of DTH in India

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MUMBAI: Dish TV, Videocon d2h and FreeDish. These were the three names that dominated India?s DTH sector headlines in 2016. The Essel Group?s Dish TV India is likely to forge the mother of a merger, (if permitted by shareholders and government departments) with another fast-growing rival -- the Dhoot family led Videocon d2h even after denying it throughout the year.

Further Vidoecon d2h was the second player in the Indian television carriage ecosystem that reported a net profit after tax or PAT? this was for the quarter ended 30 September 2016 or Q2-17.  The other player that had started reporting PAT much earlier was Dish TV.

And, the public broadcaster Prasar Bharti-owned FreeDish increased its capacity allowing the number of channels to grow from 80 to 120 to reach India?s hinterlands and hence generate larger subscription numbers.

As per the last available exact data from a government website, the total number of active DTH subscribers in India was 55,981,376 as on 31 December 2015. The number of active DTH subscribers of Airtel was 11,343,424 with a market share of 20.26 per cent of the total number of active DTH subscribers in the entire country;  the number of active DTH subscribers of Dish TV was 13,952,866 with a market share of 24.92 per cent of the total number of active DTH subscribers in the entire country. Among all the pay DTH Operators in India, Dish TV had the largest number of DTH subscribers as on 31 December 2015 and was the market leader.

The number of active DTH subscribers of Reliance was 1,786,705 as on 31 December 2015 and its market share was 3.19 per cent of the total number of active DTH subscribers in the country. Among all the DTH Operators in India, Reliance had the smallest number of DTH subscribers.

The number of active DTH subscribers of Sun Direct was 5,698,544 as on 31 December 2015 and Sun direct had a market share of 10.18 per cent; the number of active DTH subscribers of Tata Sky was 12,045,410 which had a market share of Tat Sky was 21.52 per cent; the number of active DTH subscribers of Videocon D2H was 11,154,427 and its market share was 19.93 per cent of the total number of active DTH subscribers in India

With rise in disposable income and increasing number of digital pay-TV households, India is the most compelling market for DTH services. With around 28 lakh or 2.8 million subscribers added in the first quarter of fiscal 2017 (Q1-17), DTH households at a gross level crossed over 9 crore or 90 million by 30 June 2016 as per TRAI data.

The DTH industry in India has added about 14 lakh (1.4 million) active subscribers in the quarter ended 30 September 2016 (Q2-17, current quarter) as compared to the immediate trailing quarter (Q1-17). The number of active DTH subscribers in the country increased to 6.19 crore (61.9 million) as compared to 6.05 crore (60.5 million) in Q1-7. TRAI had reported 4.05 crore (40.5 million) active subscribers for the corresponding year ago quarter Q2-16.

The highly fragmented Indian television carriage industry witnessed a consolidation of sorts. The proposed Dish TV and Videocon d2h merger seems to indicate the way ahead in the DTH space. The merged entity would have some 2.64 crore or 26.4 million subscribers, which is approximately 45 per cent of active Indian DTH subscribers. Long-term benefits of the merger synergies could negate potential short-term apprehensions, analysts felt.

The growth of OTT and VOD services on the other hand has been modifying the dynamics at the higher end of the home entertainment segment. Of the 16.8 crore or 168 million TV households, only around 9 lakh or nine million Indians are HD subscribers. Services such as Amazon Prime, Netflix, Hotstar, Voot and Eros Now, etc may attract DTH subscribers owing to competitive prices for wider and better content including international dramas and shows.

On the whole, however, the DTH sector slackened in subscriber numbers with the government?s mandate to push ahead with digitisation of television not being adhered to by cable TV operators who stalled its progress with legal challenges.  Looking at the status quo, the powers that be were left with no option but to push back the sunset for the final phase of digitisation (DAS IV) by three months from 31 December 2016 to 31 March 2017. A few industry experts feel that this could be pushed back further to 30 June 2017 and maybe even to the end of calendar year 2017. Delays will only result in retardation of growth of the carriage industry and hence affect the rate of implementation of improved services for the viewers.

The I&B ministry had broadly accepted TRAI recommendations to increase DTH licence duration to 20 years and for paring the annual fee to eight per cent of adjusted gross revenue (AGR). Some of the regulator?s ideas however lead to consternation. DTH and Cable TV operators had opposed a very appropriate TRAI move to introduce interoperable set-top boxes allowing users to change their service providers without having to change their dishes or STBs. Despite the expected churn that such recommendations are sure to usher in, over the long run, customer satisfaction is likely to be the only yardstick that will determine growth or fall of a service provider.

But is inter-operability possible? Here is the DTH players take on this: DTH players, six of whom pay government Rs 800 crore as licence fee per year in addition to non-refundable entry fee of Rs.10 crore, said that it was not feasible DTH players have invested around Rs 20,000 crore in STBs. Asia?s industry body CASBAA said that even full STB interoperability cannot ensure technical interoperability of services. It also believes that regulator-imposed technical interoperability requirements will impose large burden on Indian consumers and industry players and risk stifling innovation in development of new features.

Let us see how these players are placed in the ecosystem, how they have performed, while bearing in mind that TRAI has released numbers only up to 30 June 2016. Publically available information is limited to three entities that have reported their numbers until 30 September 2016 at the time of filing this report. In alphabetical order, they are: Airtel Digital TV services or Airtel DTH, a segment of the Indian Telecom major Bharti Airtel Limited, Dish TV India Limited (Dish TV) and Videocon d2h Limited or Videocon d2h.

As mentioned above, the market share in terms of subscribers of the DTH leader Dish TV as 2016 dawned was 24.92 per cent, whereas that of Airtel was 20.26 per cent of the total active DTH subscribers in India, followed by Videocon d2h?s 19.93 per cent.  The three operators? combined subscriber additions for the annual period ended 31 March 2016 as compared to the previous year increased by 12.3 per cent. Though Videocon d2h and Airtel Digital TV had both shown a little spike in subscriber addition between Q2-2016 and Q3-2016, the combined addition by the three showed a change of just 3.59 per cent.

In the first half year period of the current fiscal (H1-17) all the three players showed about 17 per cent increase in subscriber numbers. Airtel DTH, Dish TV and Videocon d2h added 6.8 lakh, 6 lakh and 6.6 lakh subscribers respectively, or total of 19,2 lakh, a shade lower than the 19.63 subscribers added in the first half year of the previous year (H1-16).

As per the latest TRAI data publically available, the country?s total DTH homes are around 9.15 crore or 91.5 million.  However, the growth in active as well as inactive subscribers remained similar over the past three quarter-year periods in 2016.  TRAI data shows that over a third of these subscribers were inactive. However, the regulator observed that active subscribers grew 3.36 per cent in the quarter-year to 31 March (to a total of 6.05 crore or 60.5 million). But at the same time inactive subscribers also increased at 3.05 per cent to 3.01 crore or 30.1 million, the conclusion being tardy growth.

Of late, TRAI has modified its calculation method for inactive subscribers. It now considers even subscribers that have been disconnected for less than 120 days as ?active?.

Regulatory processes in the broadcast and distribution business saw acceleration around mid-year. The draft Interconnection Regulations, 2016 and the draft Quality of Service and Consumer Protection Regulations, 2016, were released by TRAI seeking comments from stakeholders.

DTH operators however felt there were some omissions, optimistic presumptions as well as unanswered questions in the drafts, but they largely appreciated TRAI?s spirit of transparency and non-discrimination leading to DTH getting the level playing field it sought. Restrictions on the carriage fee could correct the industry?s macro environment, they felt.

DTH companies brought in various schemes to prod up their sagging fortunes. Dish TV unveiled an all new High Definition (HD) campaign. It also aligned its efforts to train an efficient workforce of DTH technicians with the PM scheme. Dish TV also added 32 new educational channels launched by the HRD Ministry on its platform.

During this time Prasar Bharti was actively moving towards business. As pay channels Aajtak and Big Magic came on DD FreeDish, possibilities opened up for more as DD prepared migration to MPEG-4, taking its capacity to 112. Now, as mentioned above, FreeDish capacity has reached 120 channels. As BARC indicated the importance of FreeDish in reaching out to rural India, channels started making a beeline to be on DD?s FTA platform. Further, 100 per cent FDI has been allowed for broadcast carriage services like cable services, teleport, and head-end-in-the-sky (HITS).

Airtel DTH revenues have been on the rise and despite its lower subscriber base. It has now overtaken Dish TV in terms of revenue. In H1-17, Airtel DTH reported revenue of Rs 1,691.40 crore, 21.5 per cent higher than the Rs 1,391.6 crore in H1-16. Operating profit (EBIDTA) in H-17 was 27.2 per cent higher at Rs 626.1 crore as compared to Rs 514 crore in H1-16. Airtel DTH?s capex in H1-17 was almost flat (0.9 per cent lower) at Rs 457.1 crore as compared to Rs 461.40 crore in H1-16.

Dish TV, as Asia Pacific?s largest DTH company in terms of subscriber numbers, has on its platform more than 545 channels and services including 22 audio channels and over 50 HD channels. It has a vast distribution network of over 2,297 distributors in 9,350 towns.

Dish TV managing director Jawahar Goel said, ?Buoyed by digitisation, notwithstanding the relative seasonal weakness in 1Q, the industry collectively added around 15 per cent higher subscribers compared to the same quarter last fiscal. Dish TV maintained its lead in incremental subscriber additions during the quarter.  About the regulatory overhangs, Goel said that the resolution of the DTH license fee matter should go a long way in ensuring non-discrimination amongst various distribution platforms.  Goel is hoping for a logical outcome of the TRAI paper on Interconnection Framework for Broadcasting TV Services Distributed through Addressable Systems.

Videocon d2h subscribers have access to over 550 national and international channels and services, including approximately 45 high definition (HD) channels and services, and over 42 audio and video services through its Music Channel Services through several subscription packages, as well as the option of choosing add-ons and a la carte channels.

In H1-17, Videocon d2h revenue increased 13.8 per cent to Rs 1,539.4 crore from Rs 1,352.9 crore in H1-16. Adjusted EBIDTA in H1-17 increased 34.8 per cent to Rs 510.2 crore from Rs 378.6 crore in H1-16. Capex in H1-17 was 16 per cent lower at Rs 335 crore as compared to Rs 399 crore in H1-16.

ARPU?s have been increasing over time, slowly but steadily. Airtel DTH has the highest reported ARPU among the three. Its ARPU in Q2-17 was Rs 232, Rs 8 higher than the Rs 224 in Q2-16, and Re 1 lower than the Rs 233 in the immediate trailing quarter. Dish TV APRU (net of taxes) was Rs 162 in Q2-17 as compared to Rs 161 in Q2-16. Videocon d2h ARPU in Q2-17 was Rs 219 as compared to Rs 205 in Q2-16 and Rs 214 in Q1-17. It may be noted that Dish TV ARPU numbers according to IND AS don?t include service tax hence comparing the ARPU between players will not be an apples to apples comparison.

End points

The merger between Dish TV and Videocon d2h will turn the game into a three corner fight from four corner one ? the other major protagonist in the game being TataSky. Reliance DTH and Sun Direct are marginal players and DTH seems for now a small forgotten part of the overall business of their leaders. It is quite likely that they may be sold off or merged with bigger players in the carriage eco-system.

The Dish TV-Videocon d2h merger will make the Essel group that controls Dish TV, as the largest player in the world in terms of subscriber numbers once its cable TV company Siti Networks Limited are reckoned.

The carriage industry in India is evolving. It has travelled some distance, but has a long way ahead. The players are more focused towards investors and not consumer oriented. Some players such as Dish TV have realised the importance of consumers and have started offering packages across price ranges. This can happen only at the cost of ARPUs?, that fact is amply demonstrated by the fact that despite a lower consumer base, Airtel DTH (and probably Tata Sky) has higher revenues than Dish TV. By the time the Dish TV ? Videocon d2h merger is complete, it is quite likely that the latter?s revenues will exceed the formers. But over a long period of time, once subscriber bases are stable to an extent, it is also quite likely that Dish TV will be numero uno on that count too.

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