Cable TV

×

×

Despite roadblocks, India attains 48% digital pay-TV penetration in 8 years: MPA

https://www.indiantelevision.com/sites/default/files/styles/smartcrop_800x800/public/images/cable_tv_images/2015/07/13/cable%20mso%20research%204.jpg?itok=AK3yrAzx

MUMBAI: Following a blitzkrieg of cable set-top box (STB) deployment, the digitisation process is taking a breather as operators shift focus from deployment to monetisation in order to ensure growth with profitability. 

 

As per a recent Media Partners Asia (MPA) report, the pace of India’s pay-TV growth story may appear to be in trouble. However, the report also points out that the process of profitable digitisation typically takes 15-20 years. “In this context, for a market characterised by low average revenue per user (ARPUs), absence of tiering and fragmented last mile cable distribution, India has done well to attain 48 per cent digital pay-TV penetration in eight years,” the report highlights. 

 

As the industry consolidates and regroups, the current phase of India’s pay-TV industry offers significant opportunities for value creation across various business segments. The key opportunities and levers, according to MPA are as follows:

 

Cable

 

Initial STB seeding by cable operators has improved subscriber declarations. Accordingly, with the transition from analog to digital, net ARPUs to multi system operators (MSOs) have grown 10x, to Rs 100 per subscriber per month. However, the current balance sheet position of most MSOs does not justify market expansion. MSOs are therefore compelled to drive operational efficiencies through prepaid services and packages. This helps improve yields from existing digital subscribers. Operators successful in executing such moves will attract refinancing (of existing debt) to expand their consumer offerings with bundled broadband and HD services. Over time, MSOs will also gain more operational control of their networks through majority ownership of joint ventures, and eventually acquire primary points at affordable prices.

 

At each stage of cable’s evolution, the operating margin for MSOs will grow multifold. The business will remain capital-intensive but as operators grow to become full-service providers, they hold the potential to generate significant returns on capital employed (RoCE). Cable assets should not just be evaluated on reach and the digital subs base but also on their ability to cross-sell high value services such as HD and broadband. Also important is their effective economic interest in the last mile business. As the approach for MSOs shifts from width to depth, structurally, cable platforms will remain concentrated in the top 50 cities. This could change dramatically, however, with the entry of deep-pocketed players such as Reliance Jio and the growth of Headend-in-the-Sky (HITS) platforms, which seek to digitise rural markets.

 

Several international and long-term financial strategics have also been eyeing partnerships with India’s cable and broadband players. This would help expedite capital as well as technical, operational expertise.

 

DTH

 

Since its inception, the DTH sector has made cumulative investments of Rs 275 billion and has been primarily responsible for driving penetration of digital pay-TV. With a base of more than 41 million active subscribers, DTH is poised to benefit from greater economies of scale. In 2014, the DTH industry reported an average EBITDA of Rs 38 per sub per month, with margins at 16 per cent. Moreover, two of the leading operators, Dish TV and Airtel Digital, have already started generating positive free cash flow (FCF). 

 

Over time, MPA expects the DTH industry at large to generate meaningful FCF through: 

 

(1) EBITDA margin expansion, as operating leverage starts to play out with subscriber acquisitions in Phase III and Phase IV DAS markets; and 

 

(2) The composition of incremental revenue becoming driven more by ARPU growth rather than subscriber volumes. Leading players will be able to self finance future growth as well as consolidate the market, creating significant value in the process.

 

Broadcasting

 

India’s $3.5 billion broadcast industry remains in a sweet spot. The dual revenue stream of advertising and subscription is expected to benefit from a resurgent economy as well as improved structural dynamics anchored to steady growth in the number of TV households (TVHH) and higher digital pay-TV penetration.

 

At 60 per cent TVHH penetration, India continues to add seven million new TV homes each year. In other words, at an average family size of 4.5 members, TV is gaining more than 30 million potential viewers each year. Television will continue to offer the highest reach to advertisers, relative to other media. As a result, advertisements will remain the major revenue stream for broadcasters, while an increase in affiliate sales will help stabilise the business and drive profitability.

 

As of end-2014, total affiliate sales for broadcasters reached $1.1 billion, according to MPA. Significantly, 80 per cent of affiliate revenues were derived from digital subscribers (cable DAS + DTH), while India’s digital pay-TV penetration stood at 48 per cent for the same period. Digitisation has therefore improved subscription yields for broadcasters.

 

In 2014, an average broadcaster’s yield from digital subscribers stood at Rs 74 per sub per month, against Rs 18 per sub per month from analog. There is therefore upside on affiliate sales, as analog subscribers in Phases III and IV convert to digital.

 

Besides leading to greater addressability, digitisation has also improved channel distribution economics by lowering the cost of distribution and allowing multiple modes on content delivery (SD, HD SVoD, TVE etc). Although cable continues to account for more than 80 per cent of the carriage and placement (C&P) market in India, since the roll-out of DAS in 2012, the cable net distribution income (or NDI, which is essentially subscription income minus C&P costs) for broadcasters has grown by 137 per cent, to $218 million. 

 

Going forward, the growth of the broadcasting industry will be driven by:

 

(1) Expansion in advertising through sub-segmentation and identifying new genres

 

(2) An increase in the addressable subscriber base with more digital homes

 

(3) Growth in subscription yields: MPA projects total pay-TV channel revenues for broadcasters to grow from $3.5 billion in 2014 to $6.1 billion by 2019, and to $7.9 billion by 2023.

 

Based on the relative growth for other markets in Asia- Pacific (ex-China), India is expected to contribute more than one-third of the total channel revenue business in the region by 2023. India’s strategic importance in the region cannot be ignored. For major international networks,

India already contributes a significant part of their overall APAC business.

 

Broadband to sow seeds for new digital assets

 

Significant investments are also being made in India’s fixed and wireless broadband infrastructure. This will help boost internet penetration and improve average broadband download speeds. To address the challenge of last mile connectivity, the Department of Telecom (DoT) is considering joining forces with cable MSOs and local cable operators to help boost broadband penetration in smaller cities and towns. The above proposal, if implemented, can open new avenues for cable broadband.

 

MSOs have already increased their investments in broadband. As of end-2014, cable broadband subscribers stood at one million, or only 0.3 per cent penetration of total households in the country. However, the entry of new players such as Reliance Jio could dramatically change the fixed broadband landscape. Having recently secured a pan-India MSO license, the company claims to have built the capacity to serve 20 million fiber-to-the-home (FTTH) customers.

 

Traditional broadcasters are looking to capitalise on the emerging digital opportunity by investing to create long-term assets. For instance, incumbent broadcasters Zee, Star and Sony have started to aggressively invest in delivering branded OTT services. The belief is that online video consumption will complement the existing linear pay-TV business. Eventually, subscription OTT services will take off as bandwidth costs become more affordable and compelling exclusive content is made available for online audiences. Nonetheless, revenue monetisation will require more scalability, as online video revenues are projected to account for not more than 10 per cent of total video industry revenues over the next decade.

Latest Reads

https://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/08/30/ANIL.jpg?itok=rnuawg4B
SITI Networks elevates Anil Kumar Malhotra to CEO

MUMBAI: SITI Networks has elevated Anil Kumar Malhotra as the new CEO of the company. Malhotra’s appointment will be effective from 1 September. He joined SITI Networks as chief operating officer in 2011. Malhotra holds over 34 years of rich experience across the cable television industry with deep...

Cable TV People
https://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/08/26/id.jpg?itok=QMqGdO8v
IMCL sees 11% revenue growth in FY19

IndusInd Media & Communications Ltd (IMCL) is hoping to achieve a positive profit after tax for the financial year 2019-20. In FY 2019, the company’s subscription revenue grew by 11 per cent and subscriber base by 10 per cent over FY 2018.

Cable TV Multi System Operators
https://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/08/13/hinduja_0.jpg?itok=KII74iba
Hinduja Ventures Ltd announces reorganisation of its media & communications business

MUMBAI: The Board of Directors of Hinduja Ventures Limited ("HVL") at its meeting held today have accorded In-Principle  approval  for reorganization of Media and  Communications  undertaking of Induslnd Media & Communications Limited ("IMCL"), into HVL subject to all statutory/ regulatory...

Cable TV Local Cable Operators
https://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/08/09/tc.jpg?itok=HyszgS9I
Tamil Nadu CM drops minister from cabinet due to cable TV tariff spat

While Tamil Nadu’s state-run cable operator Arasu Cable revised down its subscription rates recently, the move has led to a political crisis in the state. Chief Minister Edappadi K Palaniswami has dropped former IT minister Dr Manikandan from his cabinet.

Cable TV Local Cable Operators
https://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/08/06/gtpl_0.jpg?itok=sRd7GPE-
GTPL Hathway acquires SCOD18 Networking to expand footprint in Maharashtra

MUMBAI: Cable TV and broadband service provider GTPL Hathway has acquired 100 per cent shares of SCOD18 Networking Pvt Ltd on Monday. The company informed the exchanges about the acquisition in a filing on Tuesday. While the company has a strong presence in Gujarat, the acquisition has been done...

Cable TV Local Cable Operators
https://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/08/02/cable.jpg?itok=d376HqNK
Arasu Cable revises subscription rates

Tamil Nadu’s state-run cable operator Arasu Cable has revised down its subscription rates, with effect from 10 August. Under the new subscription rate, package of 190 channels will be available for Rs 154.

Cable TV Local Cable Operators
https://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/07/16/hathway.jpg?itok=enGlawoJ
Cable TV subscription drives Hathway revenue growth in Q1 FY 2020

BENAGLURU: Hathway Cable and Datacom Ltd (Hathway) reported 38 percent growth in subscription revenue from its cable TV business (CATV) for the quarter ended 30 June 2019 (Q1 2020, quarter or period under review) as compared to the corresponding year ago quarter (y-o-y) Q1 2019. CATV subscription...

Cable TV Local Cable Operators
https://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/07/12/gtpl.jpg?itok=pYsnI4rh
GTPL cable TV business pushes revenue, profits up in Q1 2020

GTPL Hathway Ltd (GTPL) reported 31.9 percent growth in revenue for the quarter ended 30 June 2019 (Q1-2020, quarter or period under review) and almost three times the operating profit for its cable TV business (CATV business) as compared to the corresponding year ago quarter Q1 2019.

Cable TV Local Cable Operators
https://www.indiantelevision.com/sites/default/files/styles/340x340/public/images/tv-images/2019/07/12/Arasu-TV.jpg?itok=WvxVKM5g
Arasu Cable plans to launch an OTT service

Tamil Nadu Arasu Cable TV Corporation (TACTV), the State-owned MSO of Tamil Nadu, is soon jumping on the OTT bandwagon. In addition to it, the MSO will also be providing IPTV services and internet connectivity to rural and urban households. The information was shared by the state minister for...

Cable TV Multi System Operators

Sign up for our Newsletter

subscribe for latest stories