‘Will provide live TV, OTT from the same device’

Tata Sky, now among India’s top five media firms, just announced a tieup with Netflix. Its profit after tax jumped to ~4.08 billion in March 2018, up from ~80 million last year, signalling the end of years of heavy investment. CRISIL has upgraded the ~57.2-billion firm’s credit rating from AA/stable to A+/positive. Chief Executive Officer and Managing Director HARIT NAGPAL tells Vanita Kohli-Khandekar what it all means. Edited excerpts:

Why this discussion around creditratingsnow? Areyou planning to raise debtor equity capital?

Being an unlisted company, we did not have to declare our numbers in public. However, with CRISIL giving us a double rating increase and making our financials public, we may as well discuss them. There is also this ongoing talk about merger and acquisition activity in the industry and how that could move us from the leadership slot to one notch lower. We have always known the numbers of our competitors since they are listed. Every platform has a unique method of declaring subscriber numbers, ranging from the first one ever acquired to active as of last night. So it is best to compare

the financials. On those, we are either equal to or higher than merged entities or will beat their combined numbers within the current fiscal year. Tata Sky is the highest tax contributor from the media and entertainment industry. It also cuts the singlelargest cheque, for each broadcaster, across platforms and advertisers. Yet, we are growing faster than our competitors and are profitable. Given our financial status, there is no immediate need for raising capital. We haven’t had any fresh infusion for three years or so.

What about the merger reports with Air tel or private equity funding?

I wasn’t party to or aware of any such talks.

What is the deal with Net fl ix?

It is in the process of getting operational. The deal is similar to what we have with broadcasters. They produce and own the content, and we take it to customers. Eventually, we will provide access to Hotstar, Netflix, YouTube and Amazon Prime Video. We will give the consumer an additional box ormodify her current box, so that she can get both live TV and OTT(over-the-top) fromthesame device. I am the distributor and the whole thing will work on a revenue share.

Analysts reckon that as online streaming takes off, TataSkyis more vulnerable than Dish or Video con since your consumer baseismoretopend…

Yes, we do have a disproportionate share of premium subscribers. However, we also have the largest share of the mass market. In the past 4-5 years, about 60 per cent of our new customers have come from villages with a population of 500-1,000. They have been buying Tata Sky and we have found a profitable way of providingthem our service at prices they can afford. As regards vulnerability, given the very low cable and satellite subscription rates in India, streaming is more likely to be an ‘and’ and not an ‘or’.

What is your customer base like?

We have 50 per cent of India’s HD customers. Roughly 800,000 of the million customers who use personal video recording are with Tata Sky and we have access to a disproportionately larger proportion of homes with more than one TV. So, we do have a 50-60 per cent of the country’s premium subscribers, whatever is your basis for defining ‘premium’. We also have the largest share of growth — subscriber, revenue and bottom line — from rural India. Roughly speaking, we would be acquiring over a third of the industry’s gross subscriber acquisitions and because of our lower churn we’ll have over a half of the industry’s net additions. Tata Sky has about 16 million subscribers currently.

On the threat from streaming…

We believe people who have access to good quality wired broadband will watch live TV (typically sports, news, etc.) on satellite TV and on-demand (streaming) onbroadband. However, access to wired broadband cannot be projected for 100 per cent of India it is not viable. Linear TV is ‘bandwidth cost-free’. So, in India, OTT is not ‘or’, it is ‘and’. In the US, where people were paying cable bills of $80-100 a month, Net fl ix could come at $12 and disrupt the market. Here at $5-7 a month for broadcast, OTT is an expensive proposition and will take along time to get down to the last household. Remember, 100 million homes in the country do not even have a TV.