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Dish TV to move STB biz to wholly-owned subsidiary
MUMBAI: Dish TV has decided to move its set-top box (STB) business to a wholly-owned subsidiary, a step that it believes will allow it to make some savings on licence fee.
The subsidiary, Xingmedia Distribution Pvt Ltd, will also accommodate other non-core businesses of Dish TV like dish antenna and allied services.
For direct-to-home (DTH) companies, the major investment consumption is in STBs. Thus, Dish TV will have its capex mainly in the form of STBs residing in the subsidiary company. Debt will also be transferred to Xingmedia.
Dish TV has a debt of around Rs 1,300 crore (Rs 13 billion). It also deploys over a million STBs a year on average. The target this fiscal is to add 1.5 million subscribers at the net level, implying that the investment in STBs will be over Rs 500 crore (Rs 5 billion) at the gross level.
After the non-core businesses are transferred, Xingmedia will be required to make the investments. Dish TV’s activation revenue will also reflect in this subsidiary company.
Dish TV will capture the subscription revenue at the standalone level. In FY14, subscription revenues stood at Rs 2268 crore (Rs 22.68 billion).
“The market looks at the consolidated entity. In that sense, there will be no difference in terms of how the revenues and expenses are split. The main purpose is to save on licence fee. Dish TV believes that it will pay licence fees only on subscription revenue since the STBs will be managed by Xingmedia. This, however, will depend on what view the government takes on this,” a media analyst said.
Besides licence fee, Dish TV has another reason for transferring the non-core businesses to the subsidiary. “A separate entity looking only after STBs and other allied services will mean a sharper focus. With such a large pile of STBs, it is better to have a separate entity handling it,” a market analyst said.
Dish TV has a net subscriber base of 11.7 million, according to data available till 30 June 2014.
Xingmedia was incorporated on 13 February 2014, and Dish TV had acquired the entire share capital, comprising 10,000 equity shares of Rs 10 face value each for a sum of Rs 100,000. Accordingly, it became a wholly-owned subsidiary of Dish TV on 24 March 2014.
Subsequently, upon approval of its board, Dish TV had subscribed for an additional 118,000,000 equity shares of Xingmedia at Rs 10 per share.
According to Dish TV, Xingmedia would undertake activities for the company which would include providing support services for satellite-based communication services, broadcasting content services, management of hard assets like customer premise equipment (CPE) and their installation, value-added services, etc. to achieve its objective.
Xingmedia also entered into an agreement with Cyquator to provide backend services including the provision of call centre services. It had paid business advance of Rs 118 crore (Rs 1.18 billion) to Cyquator to enable it to ramp up and make necessary arrangements to be in a position to provide services to Xingmedia.