DTH Cos Likely to Perform Better than Cable Firms
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