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Videocon d2h narrows net loss in FY15 amid strong subscriber growth

MUMBAI: Videocon d2h, the DTH arm of Videocon Group, has seen strong subscriber growth in the fiscal ended 31 March 2015 while ARPU has grown and content cost has inched up.

Net loss has narrowed to Rs 272.7 crore (Rs 2.73 billion) in FY15 compared to Rs 319.5 crore (Rs 3.2 billion) a year ago, demonstrating an improvement of 14.7 per cent.

Revenue growth led by subscriber additions and ARPU increase

Videocon d2h posted a strong revenue growth in FY15, led by an increase in net subscribers and expansion in ARPU.

Revenue from operations grew 32.5 per cent to Rs 2337.7 crore (Rs 23.38 billion) in FY15, from Rs Rs 1764.4 crore (Rs 17.64 billion) a year ago.

Subscription revenue grew 38.3 per cent to Rs 2058.1 crore (Rs 20.58 billion) compared to Rs 1487.7 crore (Rs 14.88 billion) in FY14.

Subscriber addition

Videocon d2h added 1.74 million net subscribers in the fiscal. The direct-to-home (DTH) operator’s net subscriber base grew 20.6 per cent to 10.18 million, from 8.44 million in the prior year.

Videocon d2h added 2.64 million gross subscribers during the fiscal. Its gross subscriber base saw a 25.2 increase to 13.09 million, from 10.45 million in the trailing fiscal.

ARPU and churn

The average revenue per user (ARPU) grew to Rs 196 ahead of guidance, with Q4 ARPU growing to Rs 202. Full-fiscal ARPU at Rs 196 was up 15 per cent compared to Rs 181 in FY14. The DTH operator was able to push through an inflation-linked APRU increase in February 2015.

Churn rate in the fiscal stood at  0.8 per cent per month, from 0.76 per cent per month in FY14.

The subscriber acquisition cost increased to Rs 1,984, from Rs 1,890 per subscriber in FY14

HD growth

The DTH operator said it is seeing a pick-up in its High-definition (HD) subscriber base. In FY15, almost 30 per cent of its incremental net subscribers opted for the HD service.

The company’s HD subscriber base now represents almost 10 per cent of the total net subscriber base, up from 5 per cent in the trailing fiscal. The company expects HD penetration to increase this fiscal, with an attendant impact on ARPU.

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Content cost

Content cost accounted for 36.2 per cent of the company’s revenue in FY15, up by 2.1 per cent from 34.1 per cent in the earlier year.

There was an increase in content cost as a percentage of revenue in the second half of FY15 as the company began operating under new content agreements.

“These new agreements provide predictability on content costs over the next 3-4 years, with better operating leverage and improved margins as subscriber base, ARPU and revenue increase over time,” the company said.

Total expenses rose to Rs 2270.75 crore (Rs 22.71 billion), from Rs 1793.55 crore (Rs 17.94 billion) a year ago.

EBITDA

Adjusted EBITDA jumped 55.3 per cent to Rs 609.1 crore (Rs 6.09 billion), from Rs 392 crore (Rs 3.92 billion) in FY14.

“This adjusted EBITDA is before accounting for Rs 135.17 million in one off security expenses and ESOP impact in Q4 of FY15,” the company said.

Adjusted EBITDA margin during the fiscal expanded 390 basis points to 26.1 per cent from 22.2 per cent a year ago, despite increase in content costs.

Commenting on the results, Videocon d2h executive chairman Saurabh Dhoot said: “We maintained our market leadership in subscriber growth and reported key financial metrics ahead of the guidance provided during the listing process. We believe, with our strong balance sheet and continued momentum, we are well-positioned for the future.”

Speaking on the growth outlook for the DTH sector, Videocon d2h CEO Anil Khera said: “The pay TV segment in India is positioned for extraordinary growth over the next few years with millions of new TV homes being created on account of strong economic outlook in India as well as the government of India’s initiative to roll out its digitalisation mandate across the country.

“We believe that 90-100 million homes will be making the switch to digital platforms which will be available to the DTH and digital cable operators. We are well positioned to benefit from this and we believe we will take the largest share of this opportunity, as we have in the past. With strong economic growth outlook for India, overall media sector is expected to grow in the years to come. We believe this will help grow ARPU, TV penetration and increase HD uptake leading to stronger revenue growth for pay TV in general and Videocon d2h in particular.”

Q4 results

For the quarter ended 31 March 2015, the company’s net loss narrowed 5.09 per cent to Rs 757.37 million from Rs 798.05 million in the trailing quarter.

Revenue from operations grew 3.99 per cent to Rs 625.28 crore (Rs 6.25 billion) in the fiscal fourth quarter, from Rs 601.53 crore (Rs 6.02 billion) in the trailing quarter. Expenses saw a marginal 1.51 per cent increase to Rs 604.54 crore (Rs 6.05 billion) compared to Rs 595.19 crore (Rs 5.95 billion) in the third quarter.

Unaudited Quaterly

Videocon d2h’s net subscriber base grew to 10.18 million in the fiscal fourth quarter, up 3.66 per cent from 9.82 million in the trailing quarter. ARPU increased 3.58 per cent to Rs 202 from Rs 195 in the prior quarter.

Nasdaq listing background

This is the company’s first earnings release since its listing on Nasdaq. The company listed its American Depositary Shares on Nasdaq on 1 April under the ticker VDTH, in a business combination transaction with Silver Eagle Acquisition Corp.

The company said it has received $273 million in net proceeds after payment of transaction expenses. It has repaid gross debt of approximately $100 million. The remaining proceeds will be utilised for additional debt repayments and business expansion.

The company has 393 million equity shares outstanding, which is equivalent to 98.25 million American Depository Shares after closing of the business combination with Silver Eagle Acquisition Corp.

The gross debt of the company was Rs 25.9 billion and cash and bank balance (including restricted cash) was approximately Rs 13 billion in FY15.