Explained: Why Bharti Airtel's DTH merger with Dish TV makes sense

The merger of Bharti’s direct-to-home (DTH) business with Dish TV, which could be announced soon, will provide the telco a strong platform to battle its chief rival in the home broadband and entertainment space, Reliance Jio.

If the merger happens, the entity will have nearly 54 per cent of the 68.92 million DTH subscribers, leaving behind Tata Sky, the largest player with a 32 per cent share, far behind.

The move comes at a time when Jio is consolidating the cable space, and, after its acquisition of Hathway and Den Networks, has been able to access over 23 million homes, or about 12 per cent, of the 200 million TV households, the same market that Bharti is also looking at addressing. With about 2 million of the cable company’s subscribers opting for broadband, Jio sees an opportunity in replacing the cable backbone with fibre and offering them fibre-to-the-home (FTTH) services, ranging from the high-speed internet, OTT (over the top) offers, as well as TV as a combine. Jio, on its own, is also rolling out FTTH with OTT and broadband and with a target to reach 20 million addressable (only 25 per cent of the addressable homes actually take a connection) homes in its first phase of launch.

Yet Airtel’s strategy is different. Unlike Jio (which has no play in DTH), it is betting big on DTH, though under its twin strategies it is also cautiously expanding its FTTH offering. 

The merger with Dish TV provides Airtel substantial access to new homes. Analysts say that though digital cable still constitutes over 40 per cent of connections across Indian TV households, paid DTH is catching up and has cornered about 34 per cent (it did lose some subscribers as a result of the Telecom Regulatory Authority of India tariff order) share.

Certainly Airtel believes it has some major advantages. One Airtel executive says that DTH is the most cost effective way to reach homes, unlike fibre where the cost of last mile connectivity is expensive and time consuming. Also it can reach pan-Indian including remote areas of the country which cable and fibre cannot, which has been a strength of Dish TV in particular.

Two, it believes that there are two different kinds of markets which require different solutions. DTH is meant for subscribers who are willing to pay Rs 200-300 a month and not more. Fibre to home is meant for subscribers who are ready to fork out Rs 700 or more a month to get entertainment through OTT, high speed broadband and the works. But it is a very niche market. 

The reason: According to estimates, the size of the FTTH market is around 30 million homes, which currently have an annual salary of Rs 10 lakh, who experts say can afford FTTH. If the rural areas are taken away, the size of the market is only 20 million. 

That explains why Jio has brought down its earlier target for FTTH to a fewer number. And even Bharti which has been offering fixed broadband for a few years has only 2.36 million homes connected and is hoping to reach an additional 5 million addressable homes in three years — a very cautious growth plan. 

Thirdly, Bharti also sees an opportunity in providing combined offers by leveraging its varying services together for those willing to pay. So it is offering a triple play integrated plan which include DTH, broadband, OTT and mobile connections in a single package with a single bill. The company is also working on coming out with an integrated box which will offer all these services without having to buy different boxes.