‘Our endeavour is that the total content cost should be lower than what it was earlier’
With the legal merger with Videocon d2h complete, Dish TV India is now busy getting the merger completed at the operational level. The DTH company is looking to exploit various synergies to take advantage of the size and scale of the merged entity. Dish TV hopes to reap Rs 510 crore in synergy-related savings.
The merged company, which boasts of 45% share of the DTH market, is looking to prune its content cost in coming months. It will also continue with both the brands to take advantage of their individual strengths. Also on the anvil is an over the top (OTT) that will offer more content.
TelevisionPost.com’s Javed Farooqui caught up with Dish TV India Group CEO Anil Dua and CFO Rajeev Dalmia to talk about the company’s plans going forward.
Has Videocon d2h fully integrated into Dish TV?
Dua: The legal integration has happened. The operational merger now starts in right earnest. Since we had enough time for planning things are moving pretty fast. Already the two teams are in common offices now. We also have shared warehouses across the country. Logistics, warehousing, physical offices are combined. Some of the structures have also been combined in terms of people. Some of the manpower rationalisation, synergy has started. The physical movement has happened between locations. Some of the other things like SAP and other things will take time because those things have to be done meticulously and they require physical time to be implemented.
Have you made any changes in the operational team?
Dua: We have two business heads one for North and East India and one for South and West India. We have two marketing heads one for Dish brand and one for the d2h brand. We have a chief technology officer (CTO). We have also hired a chief human resource officer (CHRO) for both the organisations. We have other business revenue heads for taking care of ad sales, VAS, carriage revenue, and content. We also have a national service head because the service operations are completely combined. We are moving with the company owned service model.
What will be the total staff strength of the combined entity?
Dua: Our direct staff strength will be 2,500.
Dalmia: Indirectly we will have a staff strength of 25,000 because it will also include call centres, go direct, service franchise, managed service agent and many other things.
Can you elaborate on the synergies that you are looking to exploit with this merger?
Dua: Essentially, synergy comes from various sources. We can do combined purchasing. Both the companies are purchasing various things for example set top box (STB), dish antenna, administrative stuff, and marketing material. Then there is synergy in the entire infrastructure like headend, satellite, and network. This will not only mean lower costs but also improved quality because we can go for the latest as we renovate things.
Then there are synergies on the revenue side like getting better traction from dealers, distributors. The combined entity will have close to 5,000 distributors, 300,000 outlets under coverage. That will strengthen both brands individually and lead to higher revenues. There is a possibility of increasing ad revenue due to combined negotiations with larger reach available to our customers. We also expect more revenue from carriage and value added service (VAS).
The best practices in the two organisations can be transferred across the company. That will also result in synergy.
Dalmia: We will have savings on the interest cost. The combined debt of the company is around Rs 3000 crore and the average cost of our debt was 8.5-9% whereas Videocon d2h’s interest cost was 13%. So now the joint interest cost will be 9%.
Then content purchase is a big item comprising 34-35% of the topline. That excercise is going on for last 3-4 months and we see a huge scope in that not only in FY18-19 but also in future.
In terms of content, interest and backend we are confident of achieving our goals. Other items we will take basis the prevailing situation and optimising the solution.
Dalmia: In FY19, we will save close to Rs 510 crore in synergy cost.
How many deals have you closed since the merger?
Dalmia: We have closed two deals after the merger. The rest of the deals will be closed in the next three months. More or less we will be able to achieve the number we were looking for while examining the figure for the whole year.
What kind of increase will you see in content cost?
Dalmia: We have been able to arrest the tendency of growth demanded by the broadcasters beyond a point plus there was a synergy for the joint company. Plus there will be some reciprocal arrangement in terms of advertisement on our platform by the content provider.
Dua: We also have the benefit of both the platforms which certainly helps in discussions. We also started an initiative like Mera Apna Pack on Dish TV and Mera Wala Pack on d2h. Through this pack, we are allowing customers to buy a single channel for Rs 8.5+ taxes for SD channels and Rs 17+ taxes for HD channels.
This has thrown up what customers prefer to watch. Through this initiative, we have gathered an enormous amount of data running into millions of data points showing which channels are in demand and which ones are not so much in demand. That also helps in this entire process. The joint entity and these initiatives are helping us in driving these synergies.
To what extent have you been able to rein in the content cost?
Dalmia: There will be no increase in the content cost in FY19. In fact, the content cost will be slightly lower than the combined content cost of last year to the extent we understand now. We still have three months to go to finalise three other major deals.
So your content payout will be flat?
Dalmia: It will be flat or negative.
Dua: Dish TV had one of the lowest content cost while Videocon d2h had a high content cost. Therefore, there should be synergies on the combined entity because we have benchmark data available. It has been our endeavour that the total content cost should be lower than what it was earlier.
Will you retain both the brands?
Dua: Yes. Both brands are very strong that is the strength of this merger that there are two strong brands. They have individual strengths also. Fox example, d2h is very strong in South while Dish TV is very strong in East. In North and West, both are equally strong. So both brands complement each other. It makes sense to retain both the brands. In the foreseeable future, we will continue with both the brands. Over time, we will take a view.
Will you drive both the brands equally?
Dua: We will drive both the brands as per customer requirements. There are good initiatives which are going on in both the brands. Dish TV is a pioneer in the field and Videocon d2h is the youngest kid on the block. Both are big and growing. We will look at all the initiatives on both the platforms and the ones which are working will be strengthened further.
To start with, we will focus on d2h in the South market but eventually, there will be synergy for Dish TV also in the South. We should be able to launch many more channels in South with the synergy coming from both the platforms and similarly strengthen d2h in East India.
Dish TV and Videocon d2h use different satellites? Will we see any synergy on that front?
Dalmia: That is still a work in progress. We will come out with a viable proposition to enhance the proposal of more channels as well cost optimisation but it will take some time.
Will we see migration of both the brands to a single satellite?
Dalmia: The migration can happen either way. However, there are issues of approval but that process is on.
Does the combined entity have enough capacity?
Dua: Earlier, we were choked in terms of capacity. Now with this synergy, both platforms will have the benefit of adding additional channels. Already both platforms are offering maximum channels but to go beyond that has been a problem because of capacity on individual satellites. But now with the combined synergy, we will be able to offer far more on both the platforms.
Dalmia: It is around 1450 megahertz if we combined both. Dish TV has 875 megahertz and Videocon d2h has the rest.
So, you don’t need additional transponders?
Dalmia: We need synchronisation by intelligently playing out both the satellites for the customers of both the platforms. How that has to be weaved is a technical process and a work in progress.
Will you have different subscription packs for both the brands?
Dua: They will have their own packaging but there are several things which are on the similar kind of customer understanding or logic. If you look at the Rs 8.5/Rs 17 packs these are there on both the packs. It’s called Mera Apna Pack on Dish and Mera Wala Pack on d2h. However, the individual teams may run them differently.
ARPU has been under pressure for DTH operators? How are you dealing with the situation?
Dua: ARPUs have been coming under pressure because certain players have been trying to drive it towards a lower price points Rs 199 and below. The rest of the industry in order to have a level playing field has to play along. That does put pressure on ARPUs and also because there are triggers like data costs are falling sometimes it is in anticipation of that also. Therefore, we have been pushing Mera Apna Pack because even if you have come down to a lower pack you have the extra money which you were paying till now. If you can take additional channels it will be easy for you as a customer. So you don’t have to migrate to the next pack which is Rs 100 more expensive. We have been pushing these packs to recover some of the ARPU that is going down.
Dish TV has also been pushing HD to increase ARPU. How has the response been from the customers?
Dua: HD has done extremely well for us. Both Dish TV and d2h are now only selling HD STBs. So all our STBs are capable of HD. Customers don’t need to change your STB to access HD content. From a customer point of view, upgrading to HD is much easier and much cheaper because he doesn’t go for a full STB. They can spend Rs 50 on an HDMI cable and few other things to access HD channels. We have enabled this for Dish TV and d2h. This is the other way in which we are trying to improve the profile of the customers on both platforms. We are trying to move the focus away from discounts which the industry is doing by providing better viewing experience.
As part of ‘HD for All’ initiative, we are offering a bouquet of 7 HD channels to all our customers since all our STBs were HD. If they like the experience, they can buy HD packages instead of SD.
What is the plan on the value added service (VAS) front?
Dua: On the VAS side, d2h has had a big strength in that area so we are actually pushing that going forward in terms of getting synergy on VAS platform. Again combined buying, going for popular VAS, joint marketing. This is something that is going to push VAS revenues for both the platforms.
What is your OTT game plan?
Dua: We want to get into that space. We were already present in that space. We had an app called Dish Online and it was a hit. We plan to comeback with a new OTT service in near future for both the brands. We will be coming out with a bigger service with more content, more engagement, more investment from our side. We want to make a big launch in near launch. It will offer live channels as well as exclusive content. We will offer special content which will only be available on this platform.
Do you think OTT will eat into the pay TV market?
Dua: OTT is a growing habit which is yet to mature. Even in matured markets it has not been able to dent the time spent on TV. We have our own offering planned to take a fair share of that market.
Has the Free Dish threat subsided in the light of policy limbo?
Dua: Free Dish has a problem of limited content but there is some good content available. There is always a leakage that happens. This needs to be addressed. We feel that these are the people who are sampling on the free platform and they can possibly come to us to enjoy the larger experience.
Is telecom a threat for DTH considering the fact that telcos are bundling 4G data and content to woo most customers?
Dua: There are routes through which telecom can get into this market. There are shortcomings in those routes. There are issues of cost. It may not be as cost-effective as DTH. There are issues of quality and convenience. Given these challenges, the situation is still in favour of DTH. But having said that we are seized of the challenges that it poses and we are preparing ourselves for that.
In terms of customer acquisition, what opportunity do you see in the market?
Dalmia: We have around 35 million homes left to be digitised. Around 90% of Phase III and 45-50% of Phase IV has been digitised. So 50-55% of Phase IV is yet to be digitised. But that is a slow burn considering the low per capita income, level of satisfaction. It is happening but not at the pace at which it happened in Phase I, II and III. That is why we feel that the entire universe will take 2-3 years for the digital platform. There is a switch from Free Dish to pay platform whether it is digital cable or DTH.
Will you look at manufacturing STB in-house considering Videocon d2h was doing it earlier and Dish TV also had plans to enter this area?
Dalmia: We evaluated both the proposals that is doing our own manufacturing and importing but we are yet to decide. We have a fairly good experience in import as we can harp on the quality, change the supplier, and getting contemporary STBs without R&D. Those things are there in import. Inventory management and working capital is the advantage when you do own manufacturing. But we are evaluating.