Dish TV eyes gains in FY15

Higher subscriber additions, price rises would help improve revenues and margins

Dish TV’s June quarter results were marginally below expectations, with revenue growing 11 per cent year-on-year (y-o-y) and flattish on a sequential basis to Rs 640 crore, led by higher average revenue per user (ARPU) and subscriber additions. The ARPU at Rs 170 was up five per cent sequentially due to healthy subscriber additions, increased sales of high definition packages and five-to-seven per cent price rise taken in June in mid- and top-tier packs. Compared to previous years, financials are not strictly comparable, given that the company recently changed its accounting policy of recognising lease rentals/activation fees received on account of sale of set-top boxes (STB).

Earlier, a part of the fee was treated as lease rental and amortised over a period of five years. Now, the entire STB income is treated as subscription revenues and recognised upfront. Adjusted for the same, Emkay's analysts peg the sequential revenue growth at 3.5 per cent.This coupled with higher subscriber additions at 332,000 for the quarter against a run rate of 200,000, too, helped improve ARPUs. Subscriber additions were aided by its new regional offering Zing (West Bengal, Odisha, Tripura, Assam and Maharashtra), which packages regional content with a few Hindi channels and markets them at a discount to the base pack. However, lower content costs help bring in higher margins on these offerings for the company.

  Expect revenues and ARPUs to inch up, as the firm plans to take another five per cent rise across packages from August. The company, which has 11.7 million net subscribers, expects to add about 1.2-1.5 million (an average of 300,000-375,000 in a quarter) in FY15, higher than the 800,000 net subscriber additions in FY14. The company continues to be the largest DTH player in the country with a market share of 24.5 per cent. The key gains on the subscriber front for the DTH sector and Dish TV will come about when the third and fourth phase of digitisation is implemented and there is an increase in cable prices. Expect some of this to happen after the implementation of billing process for multi system operators.

Ebidta margins were up 60 basis points sequentially to 24.5 per cent on account of strong subscription revenues, flattish content costs and lower administrative expenses. Contracts with Zee and Star are up for renewal by the end of this month, which means content costs will rise in the September quarter. However, the management expects content costs to grow in single digits for FY15.

Analysts expect margins to be higher in the 25-27 per cent range in FY15, compared to 24.8 per cent in FY14. The company's net debt is pegged at Rs 1,000 crore at the end of FY14, which is expected to come down by Rs 150 crore in FY15. It has already repaid Rs 65 crore in the June quarter.

While Dish TV reported a net loss of Rs 16 crore for the quarter, all these efforts should help the company cut losses significantly in FY15 and turn profitable in FY16, say analysts.