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Earnings Digest: Spice Communications, Zee News

Spice Communications’ losses are up 7.17 percent sequentially at Rs. 672.7 million  for the quarter ended December 2009 with the company decapitalising exchange difference of Rs. 113.9 million. Last quarter (September 2009), the company had suffered a jolt with losses rising 79% QoQ. The company has also observed better sales this quarter, with a 6.39 percent sequential rise to Rs 3.63 billion, compared to the 3 percent growth seen in the previous 2 quarters.

Details: Financials

Network Op Costs Up, Spent Rs. 543.4M On Subscriber Acquisition

Spice, which operates in 2 circles – Karnataka and Punjab – has spent Rs. 515.8 million on subscriber acquisition, lower than the Rs. 543.4 million spent in the previous quarter. Its ability to add subscribers in the two circles can be termed best as modest over the past three years.

Spice suffers higher network operating costs, 29.3 percent of total revenues, compared to other operators such as Airtel and Idea Cellular which have recorded network op costs as 20.2 percent and 25 percent of total revenues respectively. Network operating costs have also risen 8 percent to Rs. 1.065 billion and this sent total expenditure up to Rs 3.89 billion.

Earnings per share has increased from Rs -10.73 to Rs -0.98 YoY. In December 2008 quarter, Spice spent Rs 4.8 billion for the impairment of its license fee. Spice has completely exhausted its Rs. 6.3 billion fund from the IPO, using it to pay off a long term debt, for NLD and ILD licenses, network equipment and towards general corporate expenses.

The High Court of Gujarat has finally approved the amalgamation of Spice with Aditya Birla Group telco Idea Cellular and the matter is now with the High Court of Delhi. Spice has not rolled out services in Delhi, Haryana, Maharashtra & Goa and Andhra Pradesh for which it has licenses since Idea already operates in these areas.

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Previous quarters:

Zee News PAT Up 46%; Ad Revenues Up 9.5%; Aakaash Bangla

Net profit at Essel group’s broadcasting company Zee News has soared 46 percent quarter on quarter to reach Rs. 191.5 million, which is 26.7 percent higher than that recorded in the same quarter last year. EBITDA is up 41% sequentially to Rs. 364 million and the EBITDA margin is at 21.3 percent.

Details: Financials | Release

Revenues are up only 5.8 percent to Rs. 1.7 billion with ad revenues showing a sequential growth of just 9.5 percent compared to the 17 percent growth seen in the September quarter.  Subscription income (from broadcasting channels to DTH and cable TVs) stood flat at Rs. 280.6 million, 1.75 percent higher than the Rs. 275.9 million recorded in the previous quarter. The company has managed to somewhat control expenses, which are down 3 percent sequentially.

Key Corporate Developments

Ups Stake In Bengali Channel: In October 2009, Zee News acquired another 12.82% stake in Sky B Pvt Ltd, which runs Bengali infotainment channel Aakaash Bangla. It had acquired 26 percent stake in Sky B in 2008, according to a Reuters report.

The two company had first set up a joint venture in 2006 for the  free to air news channel 24 Ghanta. 24 Ghanta recorded an operating profit of Rs. 31.47 million for the nine month period ended December 31, 2009. Currently the top Bengali news channel in India is Star Jalsha.

Zee News demerged its GEC Bengali channel Zee Bangla to its sister company Zee Entertainment Ltd (ZEEL) in the September quarter.

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Restructuring To End In March: Post the restructuring with Zee Entertainment Ltd (ZEEL) whose results are here, the group chairman Subhash Chandra expects to “unlock tremendous cost and synergy benefits.” The restructuring involves the de-merger of six regional channels Zee Marathi, Zee Bangla, Zee Talkies, Zee Telugu, Zee Kannada and the yet to be launched Zee Cinemalu from Zee News and into ZEEL. The process is expected to conclude in March and not April as was previously expected. Zee’s bet on the growing potential of the Hindi news market may be affected by the I&B ministry’s refusal to allow any more TV channels to be launched due to spectrum crunch.

Zee Tamil Relaunched: Zee News, as we had seen in the previous quarter, will position its channels as primarily news channels and is steadily relaunching each of its channels – Zee Tamil was relaunched last quarter, this time it has relaunched the Marathi news channel Zee 24 Taas. It now runs  Zee News, Zee Business, Zee Punjabi, Zee 24 Taas, Zee Telugu, Zee Tamil, Zee 24 Gantalu & Zee News U.P.

In the previous quarter, Chandra offered some insights and numbers during the earnings conference call which we are including here:

  • Current news market size is 137.8 billion.
  • Television advertising market for news is about 10% of that horizon.
  • The largest share taken away by print which is about 120 billion at this point in time.
  • Television advertising market is at 15.5 billion. The breakup for that is 7 billion is for Hindi News; 5.5 billion for English News and Business and 3 billion for Regional News Channels. Regional News Channels has gone to Rs.3 billion in virtually four years.


Zee Entertainment: Ad Sales Up; More Restructuring

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