>DISH TV: Consistent market leader with highest absolute share

■ Consistent market leader with highest absolute share
The only listed Indian DTH company, it has the largest subscriber base of 12.5 m (gross for Q3FY12) with a market share of 29.4% amidst strong competition. Dish TV continues to maintain its lead in a six-player market.


■ Stabilizing ARPU (average rate per user)
The DTH segment saw ARPU pressure during FY08-09 due to intensifying competition. Since FY10, the focus has shifted toward profitable growth. Further, Dish TV has the largest number of highdefinition channels, which would further increase ARPU ahead.


This will leverage its HD advantage. The main drivers for ARPU improvement would be value-added services, movies on demand, high-definition TV and the broadcasters’ pricing power. Mandatory digitization is likely to push HD activations. Also, subscriber acquisition cost (SAC) has been under control due to the entry level price hike.

■ Capitalizing on the industry growth and regulatory approvals (digitization mandate) – Opportunity for DTH to enter cable strongholds
Six big players with deep pockets dominate the DTH market. With its maiden launch in mid 2005, Dish TV has the first-mover advantage, and has increased its net subscriber base from 2.2 million in 2007 to 9.5 million by end-Q3 FY12. It has secured FIBP approval to raise up to Rs9.8 billion, having taken this step to build its war chest as digitization momentum gathers steam.


The DTH segment has seen a robust increase in its subscriber base, a 95% CAGR over 2006-2011.


In order to digitize 88 million subscribers, the segment needs capex of Rs 132 billion. 11 organized players have a reach of almost 58% of TV distribution. We believe that only the organized sector players would have the financial muscle to take advantage of this opportunity and hence would be the biggest beneficiaries.




■ Management guidance revised to “Cautious, with a positive bias”
Dish TV’s subscriber additions rose from 0.6 million in Q2FY11 to 0.7 million in Q3FY11. Management has revised its guidance for subscriber additions in FY12, from ~3 million to ~2.6 million. It has attributed the slowdown in subscribers added to the slowing economy and recent price hikes.


Churning would certainly decline because of the actions that have been taken not only by the company (by various promotional offers and good service) but by the entire industry.


■ Turnaround on the cards, though with a delay
Current debt on the books is almost Rs.12,000 million. Of this, Rs.7,500 million is dollar-denominated, Rs.4,500 million is Indian debt. The company has secured approval to raise US$200 million as digitization opens up the opportunity of 70 million analog homes to be converted to digital.


Management had earlier indicated that the company would be free-cashflow positive by Q4 FY12. However, due to the dollar movements and sluggish top-line growth on the fewer activations, this might be delayed to H1 FY13.


■ Valuations
At present, the company is suffering losses at the net level though it has a positive cashflow from operations. Management had guided to positive free cash flow from Q4 FY12. Fewer subscriber additions due to keener competition and a higher churn rate might delay this to H1FY13.


Its competitive edge and mandatory digitization policy by the government would prove catalysts for the company. At present, the stock is close to its 52W low; we see a price target of Rs 80 in next 24 months.


■ Concerns
- The promoters’ stake was 64.75% in December 2011. They have pledged 24.17%.


To read full report: DISH TV
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