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Demonetisation, package downgrading impact Dish TV’s performance in FY17
MUMBAI: Demonetisation, Reliance Jio and package downgrading has impacted the performance of Dish TV in the financial year ended 31 March 2017. There has also been a churn away from high definition (HD) to standard definition (SD) packs.
Dish TV slipped into losses in the fiscal fourth quarter thanks to a fall in subscription revenue due to a decline in average revenue per user (ARPU), absence of a major cricketing event and package downgrading by existing subscribers.
The impact of Reliance Jio, though limited, was felt in urban areas but a more clear trend would be apparent in the next 2-3 quarters. “Jio influenced consumer usage patterns. Whether this is a temporary blip we will know in subsequent quarters,” a media analyst said.
Dish TV posted a net loss of Rs 28.3 crore in the quarter ended 31 March 2017 compared to a net profit of Rs 26.7 crore a quarter ago. In Q4 of FY16, the company had posted a net profit of Rs 482.8 crore.
Subscription revenue de-grew to Rs 620.5 crore from Rs 692.1 crore in the trailing quarter ended 31 December. A year ago, the company’s subscription revenue stood at Rs 698.1 crore.
The DTH operator added 165,000 net subscribers during the quarter to take its subscriber base to 15.5 million. The DTH operator had added 204,000 net subscribers during the previous quarter to close the net subscriber base at 15.3 million.
For the full fiscal year, the company added 1.02 million subscribers.
EBITDA dropped to Rs 190.5 crore compared to Rs 249.5 crore a quarter ago. EBITDA margin was recorded at 26.9% compared to 33.4 per cent.
Operating revenue shrank to Rs 708.6 crore from Rs 748 crore. Expenditure during the quarter was higher at Rs 518 crore compared to Rs 498.5 crore. Cost of goods and services increased to Rs 361.8 crore as against Rs 344.3 crore.
Higher transponder cost, due to additional capacity acquired during the quarter, led to an increase in overall COGS. Mark-to-market losses, due to foreign exchange fluctuations, resulted in higher other expenses during the quarter. Overall growth in programming and other costs was well within the annual guidance of 6–8%.
ARPU also declined due to package downgrading. Calculated ARPU fell 11.4% to Rs 134.1 compared to Rs 151.4 a quarter ago. Churn was at 0.9% versus 0.8% in Q3. Subsidy on the set-top box reduced further.
The company ended the fiscal year with a net profit of Rs 109.3 crore, marking an 84.2 per cent decline from Rs 692.4 crore in the trailing fiscal. EBITDA de-grew 5.1 per cent to Rs 972.8 crore from Rs 1024.9 crore.
Subscription revenues were up 4.1 per cent to Rs 2769.6 crore from Rs 2661.7 crore. Operating revenue rose 4.2 per cent to Rs 3014.4 crore from Rs 2894.1 crore.
Expenditure jumped 9.2 per cent to Rs 2045.1 crore compared to Rs 1869.2 crore. Costs of goods and services jumped 9.5 per cent to Rs 1437.1 crore from Rs 1312.2 crore.
Impact of demonetisation
The DTH company also said that demonetisation outdid a good monsoon as well as thriving economic conditions of the last year. Consumer spending remained a challenge from the latter half to the fourth quarter.
It further added that the initial growth momentum that could have catapulted the DTH industry to the next level in terms of subscriber additions took a temporary but prolonged hit. The DTH industry slightly de-grew in terms of new acquisitions during the year despite coming closer to the implementation of digitisation.
Dish TV saw subscribers conserving cash for bigger necessities right from the time demonetisation was announced in November up to the end of the fiscal year.
Dish TV India CMD Jawahar Goel said, “Fiscal 2017 threw up unprecedented challenges, but the Dish TV team took things in its stride. We minimised the impact of demonetisation while focusing on a long-term advantage in the form of recharges through online modes. Despite the odds, Dish TV managed to increase its reach and subscriber base.”
The company believes that the central government’s continued focus on development through reforms is going to keep the economic growth engines fired. Reforms like the Goods and Services Tax (GST) will be a catalyst to increase the GDP growth of the country going forward.
In addition, the pent-up demand due to demonetisation will ensure a spike in consumerism in the short to medium term. Moreover, digitisation will be at its peak this year with left-out areas including Tamil Nadu in the south picking up momentum due to regulatory push.
Dish TV is optimistic about leveraging these strong macro tailwinds. In fact, fiscal 2018 should be a defining year for the company as not only will it be at the forefront of subscriber additions but will also complete, subject to necessary approvals, the amalgamation of Vd2h with itself.
Goel added, “Revenue growth in the current fiscal year is largely going to be a function of subscriber additions and Phase IV of digitisation should have a material role to play in that. The proposed amalgamation will further help create scale in the highly fragmented TV distribution landscape in India while creating significant synergies through the combination.”
On technological developments, Goel, said, “We understand that digital will be an important part of our growth in the future and we are excited about our portfolio of products lined up for launch in the coming quarters. Dish TV’s new HTML 5-based middleware with a card-less box and a new chipset is already in advanced stages of testing and would hit the market soon.”
Future benefit due to GST
DTH services will be subject to 18 per cent GST rate as soon as the new indirect tax regime is implemented in the country. It has been a long wait for an industry that has been subject to multiple taxes, including Entertainment Tax and Service Tax, and is also liable to pay licence fees.
Dish TV became the first DTH company to fully migrate to the GST regime in all states and is now ready to implement GST from Day 1. The company had hired Ernst & Young (E&Y) for transition to GST and had taken steps to ensure that all its distributors and channel partners also register under the new regime. 100% of the company’s trade partners are now GST-registered.
As is common with any new regulation, GST might have its share of ups and downs during implementation, but those should iron out as parallel economy businesses start coming under the GST ambit.
“What should be significant in addition to our ability to pass on the uniform tax to subscribers would be the ease of doing day-to-day business and the associated savings in administration, litigation as well as compliance costs that should result from a simpler tax regime. Unlike the current Entertainment Tax and VAT regime, where different rules are used to determine tax in different regions, GST would be a single tax that should be practical and convenient to pass on to the consumer,” said Goel.
An added bonus of the GST rollout would be the increase in tax compliance in cable businesses in the country. Higher tax compliance in cable would necessarily lead to higher average revenue per user for the sector as a whole.
Developments in FY17
Dish TV recently crossed an important milestone when the Competition Commission of India (CCI) granted approval to Videocon d2h and Dish TV to merge. In addition, Dish TV has already received letters from the NSE and BSE approving the scheme. Consent from equity shareholders of the company has also been received. Application for approval from the National Company Law Tribunal (NCLT) has been made, and the company is hopeful of getting all clearances with respect to the amalgamation in place by September/early October this year.
The fourth quarter was witness to pulls and pushes around the tariff order with some of the industry participants approaching various courts seeking a stay on the order.
Speaking on the developments, Goel said, “The broadcasting community wanted forbearance on pricing which has been granted under the order. Distribution platforms have been allowed to charge for the network. The proposed tariff order, on seeing the light of the day, will ensure minimisation of discriminatory pricing among distribution platforms, thus ensuring a level playing field for all players. However, what still needs to be done is to regulate content over IP so as to bring it at par with other regulated content.”
Dish TV remains optimistic about a more industry-friendly licence fee regime and is hopeful of getting an early intimation from the ministry regarding the same.