Sun TV - all is not well

A day after Kalanithi Maran's Sun TV met analyst expectations on Q2 topline and bottomline, analysts on Friday for the first time spotted signs of pressure on the media house's revenues due to recent policy issues, including the nationalisation of cable distribution business in TN.

Accordingly, Sun TV's subscription revenues from analog (contribution from cable distributors) fell 16% to Rs 47 crore in Q2 compared to Q1. Its revenues from direct-to-home (contribution from DTH operators for content) was down 6% quarter-on-quarter to Rs 79 crore. Both these revenue streams had grown over the year-ago period.

Via Economic Times



Analog and DTH revenue streams account for 10% and 17.5%, respectively, to Sun's topline and come next to advertising in revenue generation. The management attributed the recent Trai ruling with respect to cap on pricing as reason for the decline in DTH revenue, said ICICI Securities in a research report on Friday.

"Analogue revenue declined mainly due to Arasu Cable, a rival cable network owned by the Tamil Nadu government." Sun TV is yet to come on board Arasu, which claims membership of almost all cable operators in areas where it is live.

Yet, Sun's viewership hasn't been impacted as cable operators are showing the channel on the sly. This has, for the time being, helped Sun keep its ad rates. Sun TV's advertising revenue grew 2% to Rs 235 crore, both sequentially and year-on-year, in the second quarter, in line with the tepid ad market.

For instance, leading ad spender HUL has cut ad expenditure by 200 basis points to 11.8% of sales in Q2. Tony D'Silva, CEO of the Sun Group, played down the concerns. He said, "( On DTH) There were number of agreements that had to be renewed based on the new pricing.

Overall, on an annual basis if you look at it, we will be way ahead when compared to last year's figures." On revenues from analog, he said discussions with Arasu cable are on. "Hopefully, we will finalise the agreement very soon. When the agreement is signed hopefully some of the revenues would be recovered."

Pinc Research analyst Namrata Sharma also pointed out that Sun TV's debtor days has increased unusually to 100 days, from the usual norm of 72-75 days. The only other time it had a figure of over 100 days was in 2007-08, when the Maran brothers battled with the then CM of Tamil Nadu and DMK chief M Karunandhi's family.

"Debtor days is an indicator of the negotiating power the company has with cable operators and advertisers," she said. "This shows they are under pressure. They have to prove that there is no challenge in the operating environment to bring these days to normal," said Sharma.

ICICI Securities also lowered its 2012 ad revenue growth to 7% from 11% earlier factoring-in the overall weak macro-economic environment. Sun's D'Silva played down concerns over debtor days too. He said, "By and large I don't think this is significant. This is something that keeps on fluctuating depending on the market environment."