As the deadline for the first phase of digitalisation of the cable sector approaches, the first battle shots have been fired.
The main players — Dish TV, Tata Sky and Airtel — are all gearing up to grab a piece of the markets in Delhi, Mumbai, Kolkata and Chennai, which have to accept digitisation by 30 June.
It’s no doubt a lucrative market, since spending on cable television outweighs spending on cinema by 10 times, according to a Citi report. Moreover, among discretionary categories of consumption, education and entertainment spending figure at the top for Indian households.
Source: Citi Investment Research
Digitisation, which even the UPA government says is a major achievement, is a positive for the cable sector in the long term. Multiple system operators (MSO) like Den and Hathway will be the biggest gainers. Shares of Dish TV, Zee and Sun TV are also expected to benefit. Indeed, even broadcasters will be pushing for the digitisation.
Over the years, subscription has become an important part of their broadcasters revenues. Digitisation is expected to increase their consumer subscriptions, which, in turn, is expected to boost revenues. While direct-to-home (DTH) revenues constitutes 30 percent of the cable universe, it contributes half of the revenues for broadcasters.
The only segment that will be left unhappy will be local cable operators, who will be have to disclose their actual customer bases. They might have no choice but to tie up with multiple system operators if they decide they want to spend on upgrading their systems to incorporate digitisation.
No doubt then, the DTH players are jumping in for a pie of the market. Economic Times reports, “While phase 1 has around 10 million TV homes in the four metros, over 90 million analogue cable TV homes are estimated to convert to digital by the end of fourth phase in December 2014.”
“While the number of DTH households in the country is set to go up from 37 million in 2011 to 86 million by 2016, digital cable would see its subscriber base jump from a mere 6 million to 75 million,” ET quotes a Ficci KPMG report.
Dish TV, the largest player in the DTH market with around one-third of the market share, is set to gain the most, says Citi. It already has a strong customer base, the brokerage said. The management expects 8-9 million subscribers will be added to the DTH industry even without the impact of digitisation.
However, the average revenue per user might not increase too much. That means there may be no great gains in profitability, especially since players will be more keen on adding new subscribers than increase margins.
Source: Motilal Oswal
The 30 June deadline marks the end of the first phase of digitisation. As smaller towns and eventually rural India turn digital, expect the battle to get more intense.
