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Tata Sky bets on value-added services to gain share - Sathish - 06-10-2009

Chennai, June 9 Tata Sky will not enter the “price war” that is going on in the DTH industry now. It’s betting big on customer service, technology and the quality of its value-added services.

To install each DTH connection, any service provider spends Rs 5,000-6,000, which includes a set-top box, an antenna, cable and labour charges. And, if the monthly average revenue per user (ARPU) falls to around Rs 100, it will take at least five years to recover the installation cost.

This may prove to be dangerous if a service provider offers heavy discounts on a connection.

Tata Sky says it is keen on gaining value market share. “They (the discount players) are all trading on the future. It’s very risky,” says Mr Vikram Kaushik, Managing Director and CEO , Tata Sky.

He says though the Tata Sky connection comes at a premium when compared to other players, thanks to “our customer service and quality value-added services, we hold over 45 per cent of the DTH market in terms of value. Our ARPU too, is at least 30 to 40 per cent more than most other players in the industry.”

Overall, Mr Kaushik says the industry is witnessing rapid growth. Of the 130 million TV homes, more than 85 million are pay-channel homes.

And, 25 per cent of this is expected to move to the DTH segment by the end of the year. “It’s a galloping growth for the industry.”

With more players in the fray, Tata Sky too, reduced its installation costs, though they are still higher than the other players.

However, at the end of the day, service and value offerings hold the key when it comes to retaining the acquired subscriber and ensuring a good ARPU, he says.

Tata Sky also launched next-generation set-top boxes that come with a 160 GB memory capacity personal video recorder.

“You can record another programme that is going on in a different channel, or you can give the box an instruction to record a particular programme every day at a set time on a specific channel. So, we kept ahead of the rest of the pack, consistently,” he says.

Growing subscribers

According to Mr Kaushik, over 75 per cent of Tata Sky subscribers belong to the Section ‘A’ segment.

The service provider has a 3.7-million subscriber base and hopes to touch four million in the next couple of months.

Though the gestation period is very long in the DTH industry, Mr Kaushik said Tata Sky will break even in the next two to three years. However, he declined to reveal the numbers.

Investment plans

Talking about the company’s investment plans, he said thanks to the diminishing rupee and increasing subscriber-acquisition cost, its earlier plan of investing Rs 2,000 crore to create necessary infrastructure to support its expanding customer-base “has become obsolete, and there are good chances that it will be doubled”.