Reported By:
| Edited By: Ashish K Tiwari |Source: DNA |Updated: May 08, 2018, 05:45 AM IST
Dish TV, Asia Pacific's largest direct-to-home (DTH) company and part of the Essel Group, also became the world's second-largest player post Videocon D2h's merger that got completed earlier in March. The company is now working towards deriving operational synergies and plans to invest around Rs 1,700 crore as capex in the current fiscal. Dish TV India Ltd's group chief executive officer Anil Dua and chief financial officer Rajeev K Dalmia, in conversation with Ashish K Tiwari, discuss issues, challenges and opportunities for the industry and the plans for Dish TV India.
Dua: As far as the overall market scenario is concerned, there are about 280 million households in the country, of which 180 million are the TV households. There is an opportunity to tap the balance 100 million that are yet to come into the fold of TV. Of the 180 million, about 30 million is free dish and the rest 150 million is where the paid TV exists. Within this 150 million, 30 million is still analogue cable, thus presenting another opportunity. While the Digital Addressable System (DAS) I and II implementation is more or less complete, DAS III is at 80-85% and DAS IV is only around 40%-odd. There is still 15-20% opportunity in DAS III market and 60%-odd opportunity in DAS IV market. The balance 120 million is equally divided between digital cable and DTH. On the competitive intensity side, there is digital cable, analogue cable, free dish and other DTH players. Within the DTH space right now, I think Dish TV has an advantage because two platforms have come together. We lead the space with almost 45% market share. The critical mass allows us to make a considerable difference and drive the industry in certain directions.
Dalmia: DTH today is a Rs 19,500 crore market in India growing at the rate of 10-11%. Cable television is around Rs 30,000 crore, comprising declared and undeclared subscription. A substantial part of it might be undeclared.
Dua: Merger is definitely the biggest opportunity for us right now. The joint entity has come together and we can now reposition the entire operation in a manner that we can go for growth, get the envisioned synergies and prepare ourselves for future. In terms of issues and challenges, I think, seeing this merger through successfully is, of course, the big challenge that we will have. While integrating the two legally has already happened physical integration has started in full earnest. So we have combined offices, warehousing, logistics, etc, for the joint entity. Manpower resources are being combined and a common structure has been evolved. Available talent is being positioned in the right places and functions. What's going to be a challenge, which we have worked on and trying to see it through, is the cultural integration. So there is legal, physical and cultural integration, of which the last one, I feel, will not get completed in a hurry. It will have to be hand-held and seen through. For that, we have done a lot of things like a survey in both the organisations, with the help from experts. We have evolved a set of values which the new organisation needs to embrace. We have to see this through successfully so that two minds, two DNAs become one and we are able to get the required multiplier effect.
Dalmia: There are two kinds of problems. First one is licence fee and goods and services tax (GST), which is 28%. Secondly, we are competing with the cable TV industry, which is in the 18% tax bracket. Besides, full disclosure is still a challenge - cable TV sector which is not paying full tax while also incurring lower expenditure on content costs. The disclosure problem is mainly on the local cable operator (LCO) side. While a multiple-system operator (MSO) gets between Rs 70 and Rs 110, the balance Rs 100-150 is pocketed by the LCO. There lies the problem, which needs to be addressed. Besides, there is no electronic way bill in the cable TV industry to plug the GST leak. There are two more things which the industry is debating. One is the tariff order on the content provision and last one is the guidelines on the renewal of licence and the licence fee as such. These are the pending matters with the Ministry of Information and Broadcasting. As far as licence fee matter is concerned, it is there with the Supreme Court but the renewal policy is with the ministry, for which they have taken so much time and it is still not out.
Dalmia: That's something we are asking the ministry but there is no firm reply. Besides, we cannot say anything in the matter of Supreme Court.
Dalmia: It is pending with the Madras High Court. The Supreme Court has directed Madras High Court to figure out the matter before May 15, 2018, and provide a decision. The earlier decision was a tie between two senior judges so that is why it is being re-heard by a separate bench. We are waiting for the decision, and if it happens, then the entire content pricing scenario will undergo a change. The broadcaster will decide the price of a channel and we will get 35% of the declared price. Suppose it is Rs 10 for Zee TV, then we will get Rs 3.5 and Zee TV will get Rs 6.5. There will be homogeneity in the prices charged by all the operators including the digital and analogue cable operators. If the court rejects the order, then it can get extended, reworded and or tweaked. The government is of the view that if this is done, then the consumers will subscribe to only those channels which they want, not the ones being offered by the service provider. That's a thought process and how it actually gets translated on the ground is a different point of discussion altogether.
Dalmia: From our point of view, the DTH industry is paying Rs 4,500 crore to the broadcasters. The cable industry, which is almost double in size, is paying around Rs 2,000 crore only. The DTH industry says that we are unable to collect more average revenue per user (Arpu). That's because if we increase prices, then the cable operator will enter these households with a cheaper offering. We are forced to keep DTH pricing at par with the cable TV players. So there is an imbalance. Besides, we are also paying a licence fee that's around 10% of our topline, leading to a high cost of operations. So there is a problem in the structure of the industry. Cable could not live up to the expectations of the government despite DAS I, II, III & IV, which was introduced mainly to streamline the sector. So that issue still remains and the DTH industry is fighting with the broadcasters because they keep asking for 10-15% increase in prices at the time of contract renewal. This is not supported by the topline because due to pressure on revenue of DTH players. That's the key reason for this war.
Dua: We had a DishOnline live TV app allowing subscribers to watch Dish TV on their mobile phones. You could watch quite a few live channels as well as some special content. However, the offering was way ahead of its time. The OTT trend has started getting traction and some paid players are generating revenues. This is a market which might be small and still to become reasonably sized, but it is slowly becoming stronger. While we feel that this trend will continue, it will not substitute TV in the household except for a very few niche audiences like bachelors and a few others, but by and large, it is an individual trend. It may not become a substitute to TV. It will certainly be an add-on habit like snacking content on the move at an individual level. The fact of the matter is that in the western markets where data is available, we have seen that the drop in TV viewing time is very insignificant. We looked at the US and the UK data, the total drop per day is about one minute in one market and three minutes in other. Therefore, it will be sometime before this becomes very significant.
Dua: We will participate in this market and plan to come back in a big way with a refreshed offering, with live channels, exclusive content. It will be a big-bang launch that we are planning to do in a few months from now. So we'll be there when this becomes significant and when big numbers start coming from this industry. But in the meantime, we expect the core platform to continue to grow and to continue to be significant. So there's a lot more technologically that we can do with our current set-top box; we can make it a hybrid box, it can carry live channels so we don't have to necessarily think only about the mobile phones but give internet through the set-top boxes. If you want to watch internet on your TV through your set-top box, even if you don't have a smart TV, we should be able to enable that.
Dua: There are a few players like Videocon D2h who have done it. The offering is with a few thousand households having this hybrid box. We definitely plan to come back with a competitive offering, at the right price point; something that will gain a lot of traction from the households at large. Plus, we plan to launch an OTT service with exclusive content so that there's a reason for people to be on our OTT app rather than any other. I think the core platform is here to stay and it is very substantial. So everyone will make it bigger and then also start playing in this new emergent area so that they have the first mover advantage.
Dua: Share of TV time has moved for some individuals but the share of TV will not change. So you will still need your monthly subscription because as a family, you still want to have all your channels. For a few additional people at home, you will have it on your phone, which could be connected to your TV. That is why probably the paid will not grow very strongly because it will become an additional cost factor. While paid will grow slowly, free will grow fast.
Dua: There is a fibre-to-home option I believe, and of course, through your telephone. There is a subscriber acquisition cost which is on the higher side, there is a watching cost. If you are watching through broadband, through the internet on mobile, you will end up consuming data. While it may be cheaper initially, there will be costs involved. It is an interesting phenomenon to watch and not dismiss and be prepared for. It is also something that is right now looking more expensive, compromising on quality due to streaming. As an individual viewing experience on-the-move, it may still work, but as a family viewing experience and watching on TV, DTH continues to hold the advantage.
Dalmia: We started with My Box in Noida with a capacity of 20,000 STBs per month but there were some technical issues, especially in Gujarat, Kerala and North-East. So it was stopped. Currently, Videocon is manufacturing its own set-top boxes.
Dalmia: As and when the size of the company becomes big, you need to have unification in direction. Otherwise, there can be issues. In small companies, you can have multiple decision-making touchpoints but when the turnover is over $1 billion, the promoters wanted to consolidate the holdings and that's the reason for this buyback. Once this is done, promoter holding will increase to 63%, which was the level before the merger.
Dalmia: Today they are at 23%. We will have to see how much remains after the open offer.
Dua: We are using the brands' strengths in individual geographies. The idea is not to scrap anything. Both brands will have individual prices and packaging. There is an independent brand strategy. While certain things will be similar, there will be many things that will be independent. For example, we launched the single channel package at Rs 8.50 for standard definition and Rs 17 for high-definition over the base pack, where customers can top-up with their favourite channels to create a package of their choice. Competition hasn't done anything similar but Videocon D2h has through its 'Mera Walla Pack'. We think it is a good idea. While Arpus have been falling, this will be a good idea to benefit the brand. Certain streaks will be common where both the brands are being benefited. A lot of packaging will continue to work independent.
