Dish TV Ltd

Investors with a two-year horizon can buy the shares of Dish TV, a DTH service provider, given its well-positioned offerings in a rapidly growing digital television market.

Robust subscriber additions, maintenance of a healthy market share despite several new entrants and stabilising ARPU(average revenue per user) are key positives for the company.



Dish TV has also been able to contain its content costs as well as expenses related to customer acquisition over the last 3-4 quarters.

At the current market price of Rs 56, the share trades at an EV/EBITDA multiple of 15 times its likely FY12 financials. This is at a discount to players (though not strictly comparable) in the cable services provider segment such as Hathway Cable and Den Networks.



The company has seen its revenues grow nearly six-fold year-on-year to Rs 1,082.8 crore in FY10, while it started making operating profits in FY10, reporting an EBITDA of Rs 100.8 crore. For a business that requires cash deployment, the fact that Dish TV has been able to become cash generating within a relatively short span augurs well for the company to scale up in the future.

With the telecom regulator mandating digitising television in all metros by March next year (that is, making them CAS compliant) and over 30 cities by late 2011, Dish TV, the top player in the DTH segment, would receive considerable fillip in raking in new subscribers. A new tariff order also passed by the telecom regulator recently means that the proportion of annual adjusted revenue share payable to the government would reduce from 10 per cent to 4 per cent.

Subscription drives growth

Dish TV currently has over 7.5 million subscribers for its direct-to-home offering. That represents nearly a third of the DTH subscribers in the country.

In an industry with as many as six players, many of them with deep pockets, this position should help the company drive operational efficiencies. Even in terms of incremental subscriber additions, Dish TV accounts for nearly 25 per cent of the pie.

The ARPU has stabilised over the last 3-4 quarters and is hovering at Rs 139 currently. But renewal or incremental ARPUs are now coming in at a higher Rs 172. Dish TV also plans to reduce subsidies on set-top boxes and un-bundle content fees.



With tailor-made packages, capability to deliver both free and pay channels, and ability to drive value-added services, DTH ARPU could grow over the next few years.

Evidence to this fact is that latest hit-movies are being made available to DTH viewers within 2-3 weeks of their release for a fee that is much cheaper than going to a cinema hall or multiplex. Increasingly, movie production studios are looking to de-risk their business by tying up with broadcasters for satellite rights of brand new movies, and DTH is the preferred medium for featuring such movies.

Operationally, Dish TV has been able to reduce subscriber acquisition cost over the last four quarters by over 18 per cent to Rs 2,147 per subscriber.

Cost optimisation

Content costs, the largest component in expenses for the company, too have steadily declined and have stabilised at 40 per cent levels, which compares quite favourably with other players. This has been possible due to robust subscriber additions that have given the company better bargaining power.

Dish TV is also looking at bringing content fees to less than 40 per cent of revenues this fiscal, which should aid margins.

A recent FICCI-KPMG reportindicates that from 24 million DTH subscribers in 2010 (achieved in August 2010 itself), the number is set to go up to 43 million by 2014. Going by a regulatory environment mandating rapid digitisation, and a wireless delivery favouring DTH players, an entrenched Dish TV looks well positioned to benefit from the trend

via BL