DishTV: Marginal gains in Q2

Merger with Videocon D2H, extracting synergy gains of Rs 510 cr in FY19, crucial

DishTV’s September quarter (Q2) numbers were broadly in line with estimates in a seasonally weak quarter. It reported revenues of Rs 749 crore, down four per cent over the year-ago quarter. While it added a healthy 188,000 net subscribers in the quarter, average revenue per subscriber (ARPU) at Rs 149 was down eight per cent over the year-ago period.
 
Though net adds were lower than Videocon d2h and Airtel DTH, they were better than analysts’ estimates.
 
Pricing pressure continues to be high as the company adds a larger share of subscribers from smaller towns and villages in the final phases of digitisation. New subscribers are downtrading to monthly packs of about Rs 199 compared to earlier subscriptions that ranged between Rs 250 and Rs 300. The company indicated the roll out into smaller towns will continue over the next four-five quarters, and thus there will be pricing pressure till the end of 2019.
 
However, the company indicated that ARPU levels have been moving up for three quarters, as DishTV looks at upgrading their users to premium services through trial packs such as high definition (HD) for all offers. ARPUs, which bottomed to Rs 134 in the March quarter of FY17, improved to Rs 148 in Q2, before inching up to Rs 149.
 
The HD for all campaign has helped improve the share to 16 per cent of overall subscriber base. Interestingly, 30 per cent of incremental gross additions are HD subscribers, against 20-22 per cent six months ago. This, coupled with the consolidation trend, is expected to rub off on profitability, especially in the context of higher bargaining power, with broadcasters and lower commissions to dealers and distributors.
 
In Q2, higher transponder costs led to a 19 per cent fall in operating profit at Rs 216 crore. On a sequential basis, the firm continues to improve, with operating profit margins up 160 basis points over the June quarter at 28.8 per cent. Margins a year ago stood at 33.9 per cent. A weaker year-on-year performance, coupled with a fall in other income and higher depreciation led to a net loss of Rs 18 crore. The loss would have been higher but for a deferred tax credit.
 
The key trigger would be the progress on the merger with Videocon D2H. If things go as planned, the December quarter will be the first one of financials for the merged entity. All eyes will be on the ability to extract the Rs 510 crore of cost savings that it has promised over the next year.