DTH Cos Likely to Per­form Bet­ter than Ca­ble Firms

The Economic Times - - Smart - Rajesh N Naidu & Gau­rav Laghate

ET In­tel­li­gence Group | Mum­bai: Di­rect-to-Home (DTH) com­pa­nies are ex­pected to record higher rev­enue growth than ca­ble com­pa­nies con­sid­er­ing the re­main­ing two phases of pan-In­dia digi­ti­sa­tion drive.

There are a few crit­i­cal fac­tors work­ing in favour of DTH com­pa­nies.

“DTH is clear win­ner for phase III and phase IV be­cause of higher ser­vice set up and re­tail out­let pen­e­tra­tion,” said Anil Khera, CEO of Video­con d2h. Fi­nan­cials of DTH com­pa­nies are bet­ter t han c abl e c o mpa­nies. Ac­cord­ing to an anal­y­sis of Am­bit Cap­i­tal, the cu­mu­la­tive op­er­at­ing cash flow gen­er­ated by top four DTH play­ers by sub­scribers in­clud­ing Dish TV, TataSky, Air­tel DTH and Video­con d2h tre­bled be­tween FY12 and FY15 while that of large ca­ble com­pa­nies such as Hath­way, Den Net­works, In­dusInd Me­dia & Com­mu­ni­ca­tions was stag­nant.

In the past few quar­ters, Dish TV has turned free cash­flow pos­i­tive. DTH com­pa­nies have su­pe­rior op­er­at­ing mar­gins than ca­ble com­pa­nies. Vivekanand Sub­bara­man, me­dia and en­ter­tain­ment an­a­lyst with Am­bit Cap­i­tal said, “Even af­ter three years of digi­ti­sa­tion, ca­ble com­pa­nies con­tinue to ex­hibit poor op­er­a­tional per­for­mance.” DTH com­pa­nies, be­ing linked to satel­lite, in­cur lower in­fras­truc­ture cost ver­sus ca­ble com­pa­nies, which need to lay ca­bles. Out­side ur­ban ar­eas, the pres­ence of ca­ble com­pa­nies is weak and DTH have an edge over ca­ble com­pa­nies.

Ra­jeev Dalmia, CFO, DishTV said: “Our es­ti­mate is that out of to­tal TV homes, DTH will end up with 60-65% share in th­ese two phases, while ca­ble’s share will be be­tween 30-35%.”

As of FY15, net debt to re­cur­ring EBIDTA for DTH com­pa­nies was 1-3 while for ca­ble com­pa­nies it was 3-7. This shows that the bal­ance sheets of ca­ble com­pa­nies are al­ready stretched.

In the com­ing quar­ters, DTH com­pa­nies are likely to gain from both HD ser­vices in ur­ban ar­eas and low tar­iff pack­ages in non-ur­ban ar­eas. Ac­cord­ing to an­a­lysts, the earn­ings of Dish TV are ex­pected to grow 4045% in the next three years.

Earn­ings of Dish TV are ex­pected to grow 40-45% in three years: an­a­lysts

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