SSKI - Dish TV

SSKI Research report on Dish TV:

Dish TV has reported revenues of Rs 1916 million (against our estimates of Rs 1823 million) on a subscriber base of 1.9 million in FY07. As anticipated of heavy losses in initial years, Dish TV has reported operating loss of Rs 1825 million and net loss of Rs 2523 million, much wider than our estimates of a net loss of Rs 2070 million. Significant part of the bleed comes due to higher pay channel costs, ASP expenses and subsidization of Set Top Boxes. Given the interoperability of content, the only differentiator lies in service standards and subsidies (or Balance Sheet). On both counts, given the emerging competitive environment, Dish TV is unlikely to find the going smooth.

We believe that Indian television distribution is set for digitization. With DTH being less regulated and more organized, we expect DTH to outpace digital cable in near term and become a 16m home market by 2010. While we are positive over the space as also Dish TV's first mover advantage, our concern pertains to intensifying competition. Competition from deeper pocketed players like Reliance ADAG, Bharti, Tatas and Sun would only make it difficult for Dish TV to sustain its share of incremental market (from over 75% now to 32% by 2010E) as also extend the bleed period. Increasing subsidies and customer acquisition cost, besides impending dilution to fund Rs7bn of capex, leave no value for investors. Reiterate Neutral.