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Dish TV to open up new opportunities for long-term investors
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#1
The direct-to-home satellite TV (DTH) has ceased to be a niche business in India and is gradually emerging as a volume game with five players – early entrant Dish TV, Tata Sky, Big TV of Anil Ambani, Bharti Airtel and Sun Direct – battling it out in the market. The DTH subscriber base touched the 12 million-mark in FY09 from less than a million three years earlier. The entry of Anil Ambani’s Big TV, Airtel and Sun Group last year has triggered a price war making it even more difficult for these companies to achieve financial breakeven as the cost of launching the services is high. Dish TV, however, clocked an operating profit for the first time in March 2009 quarter. If the company could sustain it in the coming quarters, it would open up new opportunities for long-term investors.

BUSINESS:

Despite the high fixed cost, the only way DTH players can lure customers away from low-cost cable operators is by subsidising the cost of set-up box. DTH providers aim to recover the cost in the long-term through subscription revenues or bundling the various channels in a bouquet. The industry currently has around 12 million subscribers and Dish TV has around five million subscribers, or around 42% of the satellite TV market. In FY09, the company more than doubled its annual addition of customers by wooing more than two million new users. The company has presence in over 6,400 cities through 35,000 dealers.

FINANCIALS :

In terms of revenues, Dish TV delivered a strong performance. For the quarter ended in March ’09, Dish TV saw a positive EBIDTA of Rs 4 crore from a loss of Rs 58 crore in March ’08 and operating loss of Rs 63 crore in December ’08 quarter. Its sales and total income in March quarter were Rs 208 crore compared to Rs 136.3 crore in the year-ago period. The total revenues for FY09 stood at Rs 739 crore, an increase of 79% over the previous year. The company currently has Rs 1,100 crore worth of debt on its balance sheet, of which Rs 850 crore is term loan from banks and Rs 300 crore is inter-corporate loans from other group companies. The company had come out with Rs 1,140 crore rights issue. It was devolved and hence was bailed out by the promoters. Promoters have subscribed around 90% of the issue.

GROWTH DRIVERS:

A major factor that has contributed to the positive EBIDTA of the company is the shift from variable cost-per-subscriber model to a fixed cost model from the broadcasters. This has allowed Dish TV to offer relatively attractive channel packages (also includes wide array of Zee channels) at low incremental cost and improve its profitability. The company has four different packages to cater to diverse needs of subscribers. Also, to increase the average revenue per user (ARPU), it has launched a channel that shows movie on demand within week of their theatrical release. Dish TV earned around Rs 3-4 crore from the movie on demand for FY09. At present, it has struck a three-year deal with broadcasters on a fixed cost model. This would present an opportunity for Dish TV to scale up its profitability comprehensively. However, it would take time for the company to become cash positive. We expect that the company would continue delivering positive EBIDTA in the coming quarters.

RISKS:

The company faces intense competition from Tata Sky, Big TV, Bharti Airtel, and Sun Direct, not to mention the good old cable operators. In comparison, there are 137 million TV households in India, out of which nearly half or 78 million households have cable connection.

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#2
It is good for investor.Dishtv is good dth company.
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