Cable network digitisation augurs well for both distribution and broadcasting companies.
The go-ahead for cable network digitisation across the country could lead to a jump in subscriber base as well as revenue growth for organised players across the cable and satellite (C&S) value chain. While the first phase of digitisation target of March 2012 is unlikely to be met, the move will finally address the long pending issue of under-reporting of subscribers. Higher customer acquisition and content costs, as well as taxes on a lower under-reported subscriber base, have led to many players reporting losses thus far.
Of the total household TV subscriber base of 135 million, 81 per cent are analog subscribers. According to estimates, local cable operators report just about 20 per cent of analog subscribers at present. Compulsory digitisation, which will be rolled out across the country by 2014, could change that scenario. The move was welcomed by the Street with stocks such as Wire and Wireless (India), Hathway and Dish TV gaining between 3 and 20 per cent. Listed cable players, which were feeling the pressure for a need to invest in network equipment and increase revenue base, stand to gain the most. Analysts believe digitisation will drive compounded revenue growth of 15 per cent over FY11-18 for multi-system operators such as Hathway and Den Networks. Analysts believe that post digitisation, there will be increased transparency in the sector and organised players may become attractive investment destinations.
The move will also help broadcasters such as Zee and Sun TV. At present, they pay around 20 per cent of their total operating costs as carriage and placement fees to cable operators. Post digitisation, broadcasters will not have to pay these fees. Broadcasters will also see higher growth in subscription revenues, which will be a more stable and fixed revenue stream compared to advertising, which accounts for 80 per cent of total revenues at present. Direct-to-home (DTH) operators such as Dish TV, which compete with digital cable operators, too will benefit from the digitisation move as higher penetration and demand for value-added services could lead to growth in average revenue per user. Analysts believe DTH operators are growing much faster than their cable counterparts, and could be the outperformers in this space. They could command 54 per cent market share of subscription revenues by 2015 from 28 per cent at present.