Management Discussion and Analysis
Dish TV - An Overview
The Indian DTH industry has seen phenomenal growth, currently encompassing close to 26Million subscribers. In a very short span of time of 5 years, the DTH sector has alreadyacquired 25% of the cable and satellite household and is expected to reach 50% in the next3 years. The key drivers towards the growth story are aggressive marketing efforts by theDTH operators, affordable and attractive entry price, quality of services, wide range ofsports events, increase in value added services, variety of channel options to thesubscribers and an overall euphoria towards acquiring better products.
The intensity of competition has led to availability of wide choice for the masses.This is also an outcome of heightened awareness through media spends, by the categoryplayers, across all media, through out the country. The majority of new customers continueto hail from the hinterland and this is amply supported by the rural consumption story ledby high disposable income due to rising growth in GDP.
The Indian economy has emerged stronger and is more resilient after the recent globalmelt-down, which is reflected in the growth of consumption pattern across all economicstrata. Despite the recent rise in inflation and interest rate, the growth in the items ofmass consumption has not been deterred. India continues to sell around 13 to 14 MillionTelevision sets per year and it is expected that this phenomenon will continue for yearsto come. The reduction in the prices of Color TV has led to widespread acceptability ofthe DTH in the rural area also. Moreover, the recent variety of Television sets such asLCD TV, Plasma TV, LED TV, 3D TV etc have resulted in adoption of DTH as a medium ofreceiving the channels.
With 8.4 Million Subscribers, Dish TV retains one third of the entire DTH marketdespite stiff competition from other 5 DTH players.
In addition to being the First DTH operator to commence operations and a strong lineageof the largest media conglomerate - Essel Group, Dish TV has had the advantage of itslargest offering of Channels and services among all the six DTH Operators. Dish TV hasprovided the benefit of cutting edge technology, which has resulted in Dish TV being thefirst and only operator in India to beam live-TV in Airlines, Buses and Indian Railways.The nation wide presence of Dish TV with a very large number of dealers, distributors,service franchisees, Dish Shoppees and Dish Care Centers, with affordable and relevantofferings across genres has contributed towards Dish TV continuing to be the largest DTHoperator in the country. Some of the recent initiatives towards creating customer delightare services like Home Pick, Call me - where the customer gets a call from Dish TV. A widerange of movies through Movie on Demand has also resulted in achievement of better numbersand brand equity.
The slow growth of Average Revenue Per User (ARPU) is definitely a cause of concern forthe entire DTH sector. The issue is being addressed through various means like contentenrichment, provision of ala carte and niche channels, expansion of recharge points,control of churn of subscribers and continuous up-gradation of quality of services offeredthrough the Dish TV DTH platform. The intense competitive scenario in a 6 player category,forcing one-upmanship in order to acquire subscribers, also some times act as a deterrenttoward the growth of ARPU and the initial entry level revenue.
The total number of households in our country is around 226 Million out of whichTelevision households are only 135 Million. Out of the 135 Million TV households, 105Million are C & S households. At present, the DTH market stands at 26 Millionhouseholds leaving large room for conversion of analog cable households to DTH and new TVhouseholds too, in the fold of DTH. With the Government drive for rise in ruralelectrification, income and the consumption patterns, people have started demandingquality products, which is working as an impetus towards the growth of the section in TierII & Tier III cities and rural areas also. This is resulting into faster adoption ofDTH as a category.
The presence of all channels across the country is an enabler and will continue to bethe game changer in favor of DTH Platforms. The recent regulation of Telecom RegulatoryAuthority stipulating the complete Digitalization by 2013 will further strengthen thedemand and growth of the sector. The recent success in installation of Dish TV DTH inrailways and buses will also unfold opportunities of such roll out in times to come. Thenew retail chain outlets spreading all across the country will also help in presence andacceptance of the DTH category as an off-the-shelf product.
The recent successful launch of Dish Tru HD will create a new demand for the technologyin the Tier I cities, further accentuating the growth story. In nut shell, the rise ofrural consumption, reduction in the entry level price, variety of content, wide spectrumof value added service, large landscape still under cable dry area and the approachtowards personalizing the services to the customers will continue to act as opportunityareas in the forthcoming years for dishtv's DTH service.
Continuous rise in competition with intense competition to acquire customers byreducing entry prices thereby contracting ARPU is a matter of concern for the industry.Moreover, the recent rise of digital cable operators in some parts of the country and thecost of servicing on continuous basis is another threat area. Churn management is anotherkey important metric for better productivity of the market inputs by the organization.
The growth of the DTH category is linked with the India growth story and both willcontinue with some amount of volatility. The focus continues to remain on acquisition ofnew subscribers from all across the country, deepening the sales and distribution network,improvising upon the services being made available to the subscribers and spread ofnetwork of pre-paid charge coupon in every corner of the country.
Being a pioneer in the category, the focus is in bringing technological changes to thecustomers in order to enhance the experience of television viewing and strengthening thebrand. One of the key strategies is a rigorous brand building exercise, as in a six-playermarket; nearness to consumers' is a key differentiator. Going forward, the emphasis willremain on being considered as one of the best service brands in the category. Thecontinuous and rigorous efforts towards brand building exercise has resulted in theCompany being awarded "Power Brand" which indicates the brand value created andgenerated over the period of your Company's DTH operations.
Revenue enhancement continues to be a focus area. Furthermore, the team is driving arevenue model to achieve profit after tax. Several new initiatives have been undertaken akey one being creation of new tiers in "Silver Saver" and "Gold Saver"to upgrade the subscribers stationed at lower packs. The initial response is encouraging.We are also optimistic on being able to generate advertisement revenue from channels,movie on demand and alacarte channels. This will definitely result in revenue movingupwards.
ARPU continues to be a focus area and in order to augment the ARPU, high definition settop boxes were launched for the up market high end customers. The initial response isencouraging and it has potential to take the Company into a new paradigm of hightechnology at affordable price point.
Optimization of cost is a continuous process. The content cost has been fixed to alarge extent and there has also been a cut down on distribution and logistics costs. Dueto the size of operation, economies of scale can be utilized across all product andservices buys, helping curtail cost even in the days to come.
Customer continues to be the "prime" focus and mover for our category. Ourstrategy is confined not only to acquire customers but attention is also given to retainand grow the customer so that the customer continues to participate in the growth story ofthe company as well as reaping the benefits of DTH.
KEY PERFORMANCE INDICATORS
The Company is subsidizing Consumer Premises Equipment (CPE) in order to gain themarket share and achieve the minimum targeted number of subscribers. Continued effort onoperational efficiencies and cost containment will drive the future numbers. We havealready achieved break even at EBITA level as a result of our focused attention onmaximizing the revenue through a variety of product mix and keeping an eye on expenses toavoid wastefulness and competitive spending.
During the year the key highlights of operational performance are as under:
Gross subscriber base stood at 8.3 Million on September 30, 2010
Operating Revenue for FY 10 stood at Rs. 10.9 Billion
EBITDA for FY 10 stood at Rs. 915 Million
Total Number of Channels & Services - 263, being the highest in the category
ARPU for FY 10 stood at Rs. 138
Expansion in Dish Care Network, Dish Shoppe, Service Centers, Distributors,Multi brand outlets, National Chain stores, Home Pick service, resulted in wider marketpenetration, reach to last mile subscriber and remain Omni present in most of the keymarkets of the Country.
Risk Management and internal Control
The Company is having a Risk Management policy to identify, analyze, mitigate andcontrol various risks associated with the business environment.
Internal control systems are continuously monitored by Internal Auditors and the Bordare also reviewed by the management for checking any deviation or departure from the laiddown policies across various business processes and guidelines. Major risk relating tofire, import, transit of goods etc. are insured. Foreign exchange liability on account ofbank loan and other imported goods are monitored and hedged based on market perception andoutlook of the forex market. We try to minimize the effect of fluctuation in forex rate,interest rate, commodity purchases, by entering into long term contracts and prudentcommercial practices.
Focused attention on management of available human resources by training, re-training,incentivizing, and a fair policy of promotion, transfer and equal pay for equal workplayed a significant role in achieving the desired objective and remained competitive interms of product quality, price pattern, brand equity and service deliverables. Nurturingof talent and best HR practices will continue to differentiate and provide strength tocontinue the lead in the DTH sector.
Statements in this report describing the company's objectives, expectations orpredictions may be forward looking within the meaning of the applicable laws andregulations. The actual results may differ materially from those expressed in thisstatement.