Postponement of cable digitisation pushes Dish TV to profitability

Essel Group's DTH business-Dish TV-is finally profitable after struggling for over 11 years, helped by the postponement of the Phase-three and Phase-four digitisation plans of the cable industry. The Rs 2,781 crore company reported a profit of Rs 3.1 crore for the 2014/15 fiscal. The company now has a subscriber base of 12 million in the 45-million strong Indian DTH market.

When the government initially set the deadline of end-2014 for completing the roll out of the third and fourth phase of digitisation (digitisation in smaller tier-two and three markets), Dish TV came up with its digitisation strategy for those markets by rolling out a product called Zing.

This offered base channel packs in regional languages. For instance, in a town like Kolhapur in Maharashtra, Zing offered only Marathi channels in the base pack at Rs 179 per month vis--vis a regular Dish TV base pack (which normally had a host of Hindi channels and some English channels) priced at Rs 250. The new offering helped the company acquire a large segment of consumers who would have typically migrated to digital cable had digitisation happened.

The strategy of having customised offerings with Zing along with its HD offerings (both contributed 22 per cent each to the subscription revenue) substantially increased the company's subscription revenue. "We realised that there is a large segment of customers who wanted content in their own language. They didn't want Hindi and English content," said Salil Kapoor, COO of Dish TV. Zing is currently available in Andhra, Telangana, Tamil Nadu, Maharashtra, Orissa and Bengal. Kapoor said in markets such as Orissa and Bengal, where Zing was rolled out almost a year ago (all these markets have both Dish TV and Zing), the company's market share has gone up to 45 per cent from an earlier share of 28 per cent. "We rolled out Zing in Tamil Nadu two months ago and our subscriber base has increased 50 per cent," he claims.

It's not Dish TV alone: the last one year has been a bull run for almost all DTH companies with the industry growing at a rate of 40-50 per cent. Most of the growth has been fuelled by the postponement of the cable digitisation plan. Companies such as Tata Sky have also capitalised on this by launching packages for the smaller markets as well as schemes like a daily re-charge plan priced at Rs 8.

In addition to this, the HD services have helped all DTH companies increase not only their subscriber base, but also their ARPUs (average revenue per user) substantially. While Dish TV's ARPU from its standard definition services is Rs 175, its HD ARPU is Rs 455. HD contributed 22 per cent to the company's subscriber base in the fourth quarter of 2014/15 and going forward, the company expects it to contribute another 22-25 per cent to its incremental subscriber additions.

The roll out of the first phase of cable TV digitisation in 2012 did create initial panic in the DTH industry. However, industry observers say that the cable companies could never win over the DTH companies even in the first phase of digitisation. "The cable companies couldn't make the transition from being B2B to B2C companies," says a senior media analyst.

Going forward, analysts expect the DTH companies such as Dish TV, Videocon D2H and Tata Sky to be on a winning run, though profitability continues to evade most of them. Unfriendly regulations, high customer acquisition costs have been an eye-sore for the DTH segment. No wonder companies such as Reliance Big are looking for buyers, while the Sun Group promoted Sun DTH is focusing only on the southern markets. If rumours are to be believed, even Airtel's DTH business is up for sale.