DTH

Q1-2016: Affirmation that DTH in India has turned the corner?

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BENGALURU: If numbers reported by direct-to-home (DTH) operators in Q1-2016 are anything to go by, then the segment might just have turned the corner last quarter.

As may be recalled, Indiantelevision.com had reported in the last quarter that the DTH industry in India had probably reached an inflection point in FY-2015 (financial year ended 31 March, 2015, previous year), and more so during the last quarter of the previous year (Q4-2015). The financial results for the quarter ended 30 June, 2015 (Q1-2016, current quarter) seem to confirm this fact.

Another endorsement of this website's surmise is a single statement in the Sun TV Network’s earning release for the current quarter – Subscription revenues continue to grow with cable TV revenues growing by approximately 13 per cent and DTH subscription revenue growing by nine per cent over the same quarter of last year. Sun TV had approximately eight per cent market share among the private Indian DTH players as on 31 March, 2015.

Note: 100,00,000 = 100 lakh = 10 million = 1 crore.

This report covers only the three of the seven DTH service providers in India (as had the previous one) since the other four – Reliance Digital TV, Sun Direct (about 97 lakh subscribers as on 31 March, 2015), Tata Sky and DD Free Dish are not listed on the bourses and their financial numbers are not available, unless the principals of these companies/segments chose to reveal them. The three players – Airtel DTH, Dish TV and Videocon d2h have already been covered in our earlier report mentioned above.

Despite Q1 being a relatively weak quarter seasonally, two of the three players – Airtel DTHDish TV and Videocon d2h have reported QoQ and YoY growth across all the important parameters that include revenue, operating profits with healthy margins, subscription numbers, average revenue per user (ARPU) for the current quarter. The third player Videocon d2h, has also shown improved numbers across all the parameters mentioned above, except in the case of operating profits – the company’s YoY and QoQ loss reduced significantly in Q1-2016.

Dish TV is the largest DTH player in terms of subscriber base and probably revenue too, in India. The company posted a 55.2 per cent QoQ growth in consolidated profit after tax of Rs 54.21 crore (7.2 per cent margin) in Q1-2016 on revenue of Rs 736.68 crore. For the corresponding quarter of last year, Dish TV had reported a loss of Rs 14.97 crore on revenue of Rs 618.04 crore.

As a matter of fact, Dish TV is also the first among listed DTH companies in the country in FY-2015 and Q4-2015 to report a profit after tax as opposed to the operating profits reported by a segment of the other goliaths for whom DTH services is just another small segment.

Airtel DTH reported the highest YoY growth in ARPU in Q1-2016, as well as the highest ARPU among the three players in this report.

Let us look at some of the numbers reported by the three players:

Airtel DTH

For Bharati Airtel Limited (Airtel), Digital TV services (Airtel DTH) contributes just a small fraction to its overall numbers. The DTH segment’s contribution to overall Airtel numbers is approximately four per cent to revenue and three per cent to EBIDTA, and yet it had a seven per cent share in the company’s capex investments pie to the extent of Rs 211.3 crore fresh investments in Q1-2016. Overall, cumulative investment made by Airtel into its DTH segment is Rs 5621.6 crore (about three per cent of Airtel’s overall cumulative investments).

Mentioning the DTH segment in Airtel’s Q1-2016 earning release, Airtel MD and CEO, India & South Asia Gopal Vittal said, “I am pleased that our revenue growth is broad based across all business units, especially the domestic enterprise and corporate segment, which saw revenues grow by 18.1 per cent, and DTH business which had a underlying topline growth of 26.8 per cent.”

Airtel DTH reported 15.8 per cent increase in YoY revenue to Rs 684.8 crore in Q1-2016 as compared to the Rs 591.5 crore in Q1-2015 and 7.9 per cent more than the Rs 634.8 crore in Q4-2015.

The telecom major’s DTH segment reported a 67 per cent growth in operating profit (EBIDTA) in the current quarter at Rs 240.8 crore (46.1 per cent margin) as compared to the Rs 143.8 crore (24.3 per cent margin) in Q1-2015 and 15.9 per cent more than the Rs 207.8 crore (32.7 per cent margin) immediate trailing quarter.

Airtel’s DTH segment reported 10.9 per cent YoY growth in Airtel DTH customer base for the current quarter at 104.12 lakh as compared to the 93.88 lakh in Q1-2015 and 3.4 per cent growth as compared to the 100.73 lakh in Q4-2015.

As mentioned above, ARPU in Q1-2016 improved significantly to Rs 222 as compared to the Rs 214 in both Q1-2015 and Q4-2015. Monthly churn in the current quarter was higher at 0.8 per cent as compared to the 0.6 per cent in the corresponding year ago quarter, but lower than the one per cent in the immediate trailing quarter.

Dish TV

Dish TV has shown almost flat QoQ revenue growth in Q1-2016. The company reported 0.9 per cent higher consolidated net total Income from Operations (TIO) in the current quarter at Rs 736.68 crore as compared to the Rs 729.93 crore in the immediate trailing quarter and 19.2 per cent more than the Rs 618.04 crore in Q1-2015.

As mentioned above, the company has reported 55.2 per cent higher PAT at Rs 54.21 (7.4 per cent margin) as compared to the Rs 34.94 crore (margin 4.8 per cent) in Q4-2015. The company had reported a loss of Rs 14.97 crore in Q1-2015, while it had reported a consolidated PAT of Rs 3.14 crore for FY-2015.

With effect from 1 April, 2015, Dish TV says that it has started netting-off certain collection fees paid to its trade partners from its topline. This has resulted in the company’s topline getting shrunk by around four per cent, with a similar number being decreased from the middle line.

Further, Dish TV transferred its non-core business (including set-top boxes, dish antenna and related services) to its wholly owned subsidiary Dish Infra Services Private Limited (formerly known as Xingmedia Distribution Private Limited) on 1 April, 2015 on a going concern basis.

The company reported addition of 3,90,000 net subscribers in Q1-2016, taking its total subscriber base to 1.33 crore as on 30 June, 2015. Post consolidation, Dish TV’s ARPU was Rs 173 versus Rs 172 (QoQ) in Q4-2015. The company reported consolidated subscription revenues at Rs 628.88 crore, up 20.6 per cent YoY.

Dish TV chairman Subhash Chandra said, “Dish TV has been actively contributing to the ‘Digital India’ movement by digitizing analog TV homes in DAS phase 3 and 4 markets and remains optimistic about its prospects to acquire a substantial share in these markets.”

Dish TV managing director Jawahar Goel added, “Our first quarter results are in line with the success of our regional and high definition (HD) strategy. Our regional offering, ‘Zing’, would soon be launched in Kerala and would carry the largest cache of vernacular channels offered in that market. ‘Zing’ cemented Dish TV’s supremacy in the DAS Phase 3 and 4 markets with custom-made content, hardware and service packages for the regional audience. High definition continues to be a value driver and a key differentiator for us compared to other DTH offerings in India. Dish TV’s industry leading bandwidth capacity supports 42 HD channels, the largest on offer by any distribution platform so far.”

Further, Dish TV recently formed a content negotiating joint venture (JV) called Comnet with its group company and multi system operator (MSO) Siti Cable Network Limited. Both Dish TV and Siti Cable are equal partners in the JV that came into existence on 1 July, 2015. As part of the JV, both companies will hold joint discussions with broadcasters post, which separate direct contracts between the broadcaster and distribution platform will be signed. The JV also tends to bring together the industry on contentious taxation issues like the recent arbitrary hike in entertainment tax in Delhi.

Videocon d2h

For Videocon d2h, the addition of 6.1 lakh gross subscribers and 4.6 lakh net subscribers in Q1-2016 coupled with higher ARPU for Q1-2016, resulted in a YoY 32.1 per cent growth in subscription revenue and 23.3 per cent growth in revenue from operations (TIO) in Q1-2016. On a QoQ basis, subscription revenue increased 3.7 per cent, while TIO increased six per cent. The company also reported a marked fall in finance costs and consequently the company’s loss in the current quarter more than halved to Rs 24.4 crore as compared to the Rs 55.8 crore in Q1-2015 and was less than a third of the Rs 75.7 crore in Q4-015.

TIO in Q1-2016 at Rs 662.83 crore was 23.3 per cent more than the Rs 537.65 crore in Q1-2015 and 6 per cent more than the Rs 625.27 crore in Q4-2015.

Videocon achieved strong subscription revenue growth of 32.1 per cent to Rs 599.61 crore (90.5 per cent of TIO) in Q1-2016 as compared to the Rs 453.77 crore (84.4 per cent of TIO) in Q1-2015 and growth of 3.7 per cent as compared to the Rs 578.33 crore (92.5 per cent of TIO) in the immediate trailing quarter Q4-2015.

Average revenue per user (ARPU) in Q1-2016 at Rs 205.30 was 9.7 per cent more than the Rs 187.14 in the corresponding year ago quarter and was 1.5 per cent more than the Rs 202.17 in Q4-2015. (Conversion rate from 1 dollar = 62.59 Indian rupee for all the three quarters).

The company considers advertisement revenue as an important contributor to its numbers, and is beginning to see an encouraging response from multiple advertisers. Videocon d2h recently set up an advertising team to sell ad inventory on its own proprietary channels and added three proprietary channels - d2h nursery rhymes; d2h Cinema HD; and another music channel. The company has also launched three Active services, namely, Active Kids, Active Games and Active Learning in this quarter, which the company says are beginning to get traction from its customer.

Videocon d2h executive chairman Saurabh Dhoot said, "We are pleased to declare a strong set of results for the quarter ended 30 June, 2015 and are on track to achieve the guidance provided for fiscal 2016. With a strong subscriber growth outlook, DTH sector gaining market share over cable and an improving ARPU scenario; we believe we are just at the beginning of a multi-year strong growth opportunity.”

Conclusion

The three players considered in this report had an approximate combined market share of 67 per cent in among the private players India at the end of the previous year, or more than two-thirds. It is still early days as yet to really conclude that the DTH sector in India has turned the corner based on good results for only two consecutive quarters reported by three companies that represent about two thirds of the sector. Of course, the amount of representation goes up to 75 per cent of the private players, if one were to consider the Sun TV market share of eight per cent. However, looking at the intensity and the moves of these players, it is quite likely that the sector should continue showing improved positive results, and may have turned the corner in Q4-2015.

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