Dish TV shows marginal recovery

Boost from merger with Videocon’s DTH business key

Dish TV’s June quarter (Q1) consolidated performance was slightly ahead of the consensus expectation and signals recovery from the lows of Q4FY17. After four quarters of sequential decline, average revenue per user (ARPU) stood at ~148, up 10.4 per cent over the March quarter. The decline in ARPUs in the prior quarters was due to a shift in preference towards lower-value packs.

Dish expects ARPUs to ramp up as the proportion of high-definition (HD) packs improve and multi-system operators (MSOs) increasingly adopt the prepaid model for revenue collection.

Sequential ARPU growth, coupled with a 12.7 per cent increase in net subscribers, helped subscription revenues rise 11.2 per cent sequentially to ~690 crore. Overall revenues (including advertisements and rentals, among others) came in at ~738 crore, against consensus estimates of ~719 crore. The company said subscriber additions at 186,000 in Q1 were lower than analysts’ estimates of about 200,000.

On a year-on-year (y-o-y) basis, subscription revenues were down five per cent, while operating profit was down 23 per cent. Given pricing pressures and higher proportion of lower-priced packs, ARPUs, which have improved sequentially, are still down 10 per cent y-o-y. As in the March quarter, lower subscription revenues, higher costs and unfavourable operating leverage impacted profitability on a y-o-y basis. Operating profit margins in Q1 at 27.2 per cent were slightly below the estimates of 28 per cent. The firm suffered a net loss of ~13.9 crore, against an expectation of a profit, due to a 10 per cent rise in depreciation and 12 per cent rise in interest costs. A deferred tax write-back of ~17 crore subsidised a wider loss figure.

Subscriber additions are likely to pick up in the second half of FY18. With 70 per cent of its subscribers coming from the rural areas and a stronger distribution base, coupled with a good monsoon, Dish hopes to take a bigger chunk of the rural pie. It also expects some relief from FreeDish (Doordarshan’s DTH business), given plans to convert the free platform into an MPEG-4 encrypted platform.

While Dish could see some traction on subscriber base, the key for the Street will be the upcoming merger with Videocon (effective October 1). The company has indicated net savings of ~180 crore from the synergies in FY18 and ~510 crore in FY19, the latter is higher than analyst estimates of ~400 crore