dishlogoDTH company Dish TV by the Essel Group has experienced a further dip in subscription ARPU to Rs. 139 from Rs. 141 due to addition of many subscribers on the one year package last year, which compressed the annual average ARPU – they will be renewing their subscriptions next month. “They were paying just Rs. 65, as against minimum Rs. 125, which is the normal renewal ARPU. It should improve from next quarter,” said Jawahar Goel, Head of Business, Dish TV, in the earnings call.

Dish also recorded lower additions at 0.4 million connections in the quarter ending September 2009, compared to the previous quarter, when it added 0.44 million subscribers. The reason for decline in subscriber addition prior to October was termed as a “pre-season readiness effort”. Dish would add over 2 million customers in total for the full year. The company’s gross subscriber base is 5.91 million, out of the 15.17 million DTH connections in the country.

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Details: Release | Financials | Conference Call

Financials

Dish has reported an 18.8% fall in net losses to Rs. 561.33 million, which is a 63.58% drop year on year. Its EBITDA  (minus depreciation) rose 6% to Rs. 730 million compared to last quarter. Calling it an extension of momentum from Q1 into Q2, Subhash Chandra, Chairman, Zee Group said, “The last quarter has been in the minimum of operating losses and that Dish TV is EBIDTA positive for the third quarter in continuation.”

Revenues for the quarter ended Sep 09 grew 4.37% sequentially to Rs. 2.57 billion, of which carriage revenue was Rs. 4 crore while revenue from subscriptions amounted to Rs. 200 crore. Compared to the corresponding period last year, revenue in the quarter has grown 48.6%.

Expenses, HITS

The company has managed to finally control its overburdening expenses: it rose only 2.11% to Rs. 3.07 billion and is marginally lesser than expenses in Sep 08. But direct cost as a percentage of revenue has not reduced as the company spent Rs. 35 million towards HITS (Headend In The Sky) content costs this quarter.

Essel Group invested in a HITS platform in 2008 for its sister cable TV company WWIL, a listed entity. Dish TV was to transfer the Headend in the Sky (HITS) platform to its sister cable company WWIL but is waiting for the HITS policy to be cleared by the government. “Unless that happens, there is no change,” said Chandra. The cabinet decision is expected to approve the policy by the end of the year, allowing Cable TV operators to downlink signals from the satellite and distribute them through their networks more effectively.

Programming expenses rose 4.67% sequentially to Rs. 1.12 billion while advertising expenses only increased marginally to Rs. 152.74 million quarter on quarter, but were 23% lower than ad expenditure in Sep 08.

Churn, Competition & Average Subscriber Acquisition Costs

Currently Dish TV experiences a churn of 0.5% per month, which is around 75,000 subscribers for the quarter, but the industry is still growing and will become more competitive and this will escalate.

Dish believes there is still plenty of room for growth: according to Chandra, at present there are 85 million households in India, of which 16 million are DTH ones and the penetration is just 20%. The market has an estimated CAGR of about 40% over the next 5 years.

It experienced a higher average subscriber acquisition cost in the quarter of Rs 2,635, compared to Rs 2487 in June quarter but this is expected this to average at Rs. 2500 going forward.

set_top_boxOn Videocon D2H

Videocon D2H is the latest entrant into the DTH scene. On what he thought of the service, Chandra said, “I would not like to comment. The service has not yet made an impact on the market and subscriber numbers.” Dish now has six competitors: old rival Tata Sky, Reliance ADAG’s BIG TV, Airtel Digital TV, Sun Direct, DD Direct and Videcon D2H.

Content, Movie Rights

On the content side, it added 3 new channels in the quarter. DTH firms are investing in movie rights as a differentiator but Dish TV does not view it as a significant revenue stream. “Movies released on DTH is not big revenue-wise, but it’s a way for the film industry to amortize the movie rights. We’re not looking at exclusive movies – it cant be exclusive as per the regulation, and exclusive movies have a premium. We always do on a revenue share basis,” Chandra said.

Grant Of Options To Three Employees

The board of directors today approved the grant of 160,900 options convertible into 160,900 equity shares of Re 1 each to three employees of the company at an exercise price of Rs 41.45.

Key Corporate Developments

September

August

July

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