There are 13 million TV viewers in the country who are served by cable and direct-to-home (DTH) services. DTH providers hope to convert a lot of them to their technology platform. Dish TV India is one of them. DTH offers superior viewing pleasure and for long it was assumed to be a growth business. Dish TV is one of the five DTH service providers and has 75 lakh customers; it wants to add another 25 lakh in FY10. The revenue is expected to grow to Rs1,000 crore by then. Dish TV, which currently offers 240 channels, plans to increase that number to 400 by the end of this fiscal.The expansion story sounds attractive but the facts on the ground are different. Well, growth in DTH services has declined almost 35% in Q4 2009 compared to the same year-ago quarter. Moreover, Dish TV has not made even a paisa of operating profit in the past eight quarters. The huge operating expenses of this business will continue to affect profitability. Transponder lease, licence fees, uplink charges, programming and other costs are very high. In the early days of DTH business, the players, including Dish TV, had kept the entry price low to wean away cable TV customers. However, DTH is not yet a superior value proposition, despite low entry prices.
Cable still dominates. Currently, Dish TV has three monthly plans -- @ Rs113, Rs190 and Rs283 (plus taxes). Such low charges should have led to a massive subscriber base to ensure a healthy business. However, there has been an alarming decline in the rate of customer addition by the sector in the Q4 2009. If low customer addition is the result of the economic slowdown affecting purchase decisions of DTH Vs cable, DTH cannot be a growth story and Dish TV’s 128% gain in the stock since November last year looks speculative.
Source: MoneyLife
Few facts:
** Cable operators are not sitting quite just looking at their business going away from them. At many places cable operators have reduced their monthly fees to such lows that even DTH operators can not fight with them. At my new home in Mumbai suburb, cable operator is offering subscription at Rs. 50 per month (Yes Rs. FIFTY only). How? Our builder have provided us with the common cable system. So cable operator just needs to provide an amplifier with one high frequency connection instead of laying down the cables for every flat. Calrity is good enough, signal is not distorted at all. Who needs to buy a DTH paying few thousand bucks for system and installation with restricted chanel at lower end recharges. If you observe carefully, you get very few channels in lower end packages and all channel packages would cost you more than Rs. 300 in any DTH.
Another big competitor for DTH services is IP TV. Internet Protocol TeleVision. IP TV service is distributed along with broadband internet connections. Companies like MTNL and BSNL have already started providing this service through their vast existing distribution network. Such services are on the way from other two big players Reliance and AIRTEL.
Considering this competition, DTH companies may fail to live upto expectated growth that is being anticipated from investors.
