Dish TV : Bland fare

The lack of funds could slow down subscriber acquisition

With Indivision India Partners unwilling to subscribe to shares of Dish TV at Rs 100 per share, the DTH service provider faces a serious setback.

The proposed infusion of Rs 250 crore would have come in handy because capital is key in this industry, where content needs to be acquired and set top boxes subsidised.

Dish TV requires about Rs1,500 crore for capital expenditure to fight the intensifying competition in the DTH space; not only are new deep-pocketed players entering the arena, they could come in with more attractively priced packages.

Sun has started rolling out its DTH service in the four southern states, Reliance is in the process of doing a soft launch and Bharti's service too will soon be available in several states.

Under the circumstances, the cost of acquiring customers is bound to go up; currently Dish TV spends about Rs 1880 for signing up a customer and this could go up to as much as Rs 2500.

Such an increase in the costs will put some pressure on the balance sheet. For FY08, the company is expected to post losses of around Rs 380 crore on revenues of Rs 430 crore. In FY09, while revenues could touch Rs 900 crore, the losses could go up to Rs 400 crore.

Without capital in a competitive environment, Dish TV runs the risk of losing market share. In the December 2007 quarter, its share of the incremental growth had fallen to 43 per cent from 75 per cent in Fy07 and it may have fallen further since then with the entry of Sun into the market.

Even today, Dish TV commands a market share of 64 per cent with a subscriber base of 2.8 million. But even if the base increases to around 4.5 million subscribers by 2010, its share of the total estimated market of 14 million subscribers, is likely to fall to about 30 per cent.

The stock has lost about 40 per cent since January this year when it was trading at levels of Rs 100. At the current price of Rs 62, the risks far outweigh the rewards.

Pfizer : Weak performance

With operating revenues remaining virtually flat at Rs 694 crore and a fall in the operating margin, by 160 basis points to 22.4 per cent, FY07 has been a disappointing year for Pfizer.

The net profit has jumped 221 per cent to Rs 339 crore only because the company sold its Chandigarh property for Rs 274 crore. Revenues for the November quarter grew just under 4 per cent to Rs 183 crore.

As such, the operating profit margin crashed 470 basis points to 13.3 per cent , mainly because of higher manufacturing and other expenses.

In contrast, MNCs like Glaxosmithkline Pharma saw their operating margin improve by 150 basis points to 27.5 per cent in the December 2007quarter.

Pfizer is struggling to grow the pharma business, say analysts adding that one reason is the shortage of codeine an input for Corex a cough syrup. Corex , contributes approximately a fifth of Pfizer's revenues.

Consumer healthcare brands such as Gelusil, Nebasulf and Selsun too appear to have fared badly. In December 2007, Pfizer sold the Listerine, Benadryl, Caladryl and Benylin brands and will make Rs 215 crore from the sale.

The impending sale of these brands too impacted their performance""consumer brands are understood to have contributed approximately Rs 110 crore to the full year revenues.

The street was probably anticipating poor numbers which is why the stock has remained more or less flat at Rs 661. However, over the last six months it has underperformed the Sensex by about 20 per cent.

For November 2008, analysts expect a 10- 13 per cent fall in the company's revenues , given that some consumer brands have been sold.

However, Pfizer has large reserves that could be used for a VRS, dividends, a buyback or possible acquisitions. At Rs 661,the stock trades at six times trailing 12 ""months earnings and all upsides appear to be factored into the price. Glaxo Smithkline commands a discounting of 15.65 times trailing earnings.