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Help TRAI's digital telecast move won't help many
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Against preliminary anticipations , Telecom Regulatory Authority of India's (Trai) recommendation to adapt digital telecasting for cities with more than a million population by March 2013 may not be as beneficial to direct-to-home (DTH) players. When implemented, these measures are expected to fuel a tariff war among DTH players thereby reducing overall profitability.

Currently, non-digitsed subscribers form a larger portion of the total pay TV subscriber base. Over 80% of pay TV subscribers prefer cable, followed by digital reception (around 18%) and a small percentage of internet based TV connections. A shift to digitised viewing experience should ideally present a large subscriber base for DTH operators and cable companies offering digital services. The only glitch is in the form of Trai's another recommendation that proposes to increase the share of broadcasters in earnings of DTH play-ers.

Currently, broadcasters retain 14% of the average revenue per user (ARPU) of DTH companies and multi-specialty operators (MSOs). Trai has proposed to raise this to as high as 45% after complete digitisation. Fallout of this decision will be that DTH operators, in particular , would have to increase their prices of channel packages to compensate for higher outgo to broadcasters. But while doing this they may risk to lose subscribers, given highly competitive situation.

At present, there are 1,000 multispecialty operators (MSOs), 55,000 local cable operators (LCOs) and six DTH operators. Analysts feel that this could lead to a price-war among incumbents thereby lowering the sector's profit margins. One way to avoid this is a strong focus on high definition (HD) content, which commands nearly three times better ARPU than regular digital content. But this is easier said than done, because though HD content gives operators higher revenue, it demands more capital expenditure.

Therefore, only those players with higher market share can benefit from HD investments. For instance, Dish TV, which has the highest market share of 32% in the digital industry, would find it relatively easy to implement the HD strategy. The company has begun offering 30 channels in HD format. In case of MSOs, a lot would depend upon their promptness in acquiring LCOs as higher subscriber volumes could be the only way to reduce the impact of higher revenue outgo to broadcasters.

ET

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