DTH and broadcasters to benefit the most from digitisation, says Credit Suisse
Moneylife Digital Team 19 April 2013

The media sector will be one of the few sectors in India to demonstrate healthy earnings growth in the next two years, says Credit Suisse in its Equity Research report

The Indian TV industry is passing through an once-in-a-lifetime change in the form of digitisation, whereby the entire country will move to a digital mode of content distribution. Digitisation will allow broadcasters to charge a fairer price for content and result in an increase in ARPU (average revenue per user) as well, apart from better distribution of ARPU. Digitisation will impact advertising as well—it will increase the reach for a number of small channels (with consumers getting >2x channels) and hence, should be negative for the existing large bouquets and positive for niche channels.

 

Sun TV, given its dominance in the south, is able to better monetise its content, evident from its DTH (Direct to Home) ARPU which  is  almost  2x  that  of  Zee. These are the observations made by Credit Suisse analysts in its Equity Research report on the television industry in India.

 

According to Credit Suisse, there is not enough clarity on revenue sharing between the multiple-system operators (MSOs) and the local cable operators (LCOs). Once the advantage of analog cable, i.e. lower taxes and content costs, goes away, LCOs will be forced to hike prices. This would  enable  DTH  (Direct  to  Home)  companies  to  also  raise  tariffs.  Unlike DTH,  the  MSOs  need  to  share  revenues  with  LCOs  and  hence  have  a higher  profitability  on  a  per-subscriber  basis.  Credit Suisse analysts maintain ‘outperform’ on Dish TV (24% potential upside).

 

DTH companies are likely to benefit not only from additional subscriptions, but also improvements in ARPU, according to Credit Suisse. Despite a slowing economy,

ad spend should hold up on likely FMCG gross margin expansion and consequently improve the profits of broadcasters. On the whole, the media sector will be one of the few sectors in India to demonstrate healthy earnings growth in the next two years, says Credit Suisse.

 

The Indian media industry’s size stood at around $17 billion last year.  There is still significant under-penetration in terms of consumer spends on media and entertainment in India, with the country far behind developed countries on parameters such as media industry size as a percentage of GDP and annual media spend per capita.

 

Credit Suisse analysts feel that Sun TV, Dish TV India and Zee TV will be the high performers in the equity market (Please see figure below)
 

In the table below, Credit Suisse presents a comparison of Indian media companies with foreign ones in the sector, for equity performance:

 

Comments
arun adalja
1 decade ago
if you have 2 tvs in a house then you require two set top box and you have for both connection and it becomes costly in past we just pay some money for second tv.dth fellows can avoid two set top box by putting some thing.views are welcome.
Gunda
Replied to arun adalja comment 1 decade ago
Already exists. For the second TV, DTH operators usually charge you something like Rs. 150-200 per box even if your subscribed package for the first TV is 500 rupees. So instead of 1000 rupees for two TVs in the same home for DTH, you will pay 650-700 rupees.
arun adalja
Replied to Gunda comment 1 decade ago
if you pay for 2 tvs around rs 600 per month then it is a costly affair for dth.in past we used to pay rs 300 per month for two cable connections.
Array
Free Helpline
Legal Credit
Feedback