DTH: SECTOR OUTLOOK

DTH: Beaming future on zooming economy

From one service provider and a little over half-a-million subscribers at the end of the financial year 2005-06, to six service providers and 30 million plus subscribers now, the direct-to-home (DTH) industry has come a long way in an analogue cable-dominated market.

The first mover and the country's largest DTH player with over nine-million subscribers onboard, Dish TV, claims to have acquired a little over a million subscribers in the last three-and-a-half months. “Now, as an industry, we collectively enrol over a million subscribers a month with ease,” said a senior executive of Dish TV. In 2005, when Dish TV launched the country's first DTH service, not many people knew about the technology and its advantages. Making cable-dark areas as its prime target, the company managed to rope in just a little over half-a-million subscribers in the first year of operation.

With the entry of other players such as Tata Sky, Sun Direct and Big TV, AirTel and Videocon in the following years, the market gained good momentum and started expanding faster with every passing day, thanks to their aggressive high-decibel marketing and low entry fee for subscribers.

Industry observers say, it is likely to improve further and grow even faster in the months to come. In India, there are over 140 million TV homes, and of this, about 100-110 million homes come under the cable and satellite (C&S) market. With around 32 million subscribers, the DTH industry commands 32 per cent share of this market.

Largest DTH market

According to a study by Media Partners Asia, India will become the largest DTH market in the world in terms of subscribers by 2012 surpassing the US. However, Mr Salil Kapoor, Chief Operating Officer of Dish TV, is of the opinion that the Indian DTH industry with at least 33 million subscribers by the end of the current financial year would comfortably become the largest market in the world.

This can also be attributed to the fact that there are still large patches of cable-starved areas in the country, where people watch only terrestrial channels (which are Doordarshan channels), and also cable networks are not yet digitised in the country.

Despite all this, companies (except Dish TV which turned EBITDA-positive in the last few quarters), continue to bleed as the industry toils under a heavy tax regime, high subscriber acquisition costs and poor ARPU (average revenue per user).

According to industry sources, ARPU currently hovers around Rs 125-150 a month, of which around 30 per cent goes to the Government as licence fee and taxes (entertainment tax and service tax), and 50 per cent to content providers (broadcasters as charges). Only the remaining 20 per cent is the net revenue for the service provider. For example, if a subscriber pays Rs 150, nearly Rs 45 goes to the Government, Rs 75 to the broadcasters and the DTH service provider gets only the remaining Rs 30.

“Provided the operator achieves a critical mass of subscriber base, it will be very difficult to be cost-effective and turn cash-positive,” says Mr Sugato Banerji, Chief Marketing Officer (DTH Services), Bharti Airtel.

Big investment

Though the subscriber acquisition costs are said to have come down, companies still spend at least Rs 4,500-5,000. According to industry sources, on an average, an MPEG 2 set-top box with antenna and other equipment costs $37-38, while the MPEG-4 costs $12-15 more. This is despite the fact that bulk orders for these equipment fetch a “substantial discount” for the service providers.

“It's still a big investment and will make the gestation period even longer considering the current ARPU,” said a senior executive of another service provider.

However, according to some analysts, thanks to the increasing number of two-TV homes in urban and even tier-II markets, delay in digitisation of cable networks and growing sales of high-definition TVs, the subscriber base will certainly expand.

Besides, with rising ARPU and falling subscriber acquisition cost, majority of players will report at least break-even in the next couple of years.