DTH FACES TELECOM PRICING WOES

DTH Faces Telecom Pricing Woes

(Source: Samididh(a) Sharma / TNN)
Times of India / Nov. 22, 2010

Index

1. DTH TV Scenario
2. Report by Media Partners Asia (MPA)
3. Observations by Samidha Sharma (TOI)
4. Strategies / tactics employed by DTH operators to win subscribers
5. Quotes

DTH TV Scenario

(Source: Times of India / Nov. 22, 2010)

DTH Operator	Share of DTH Market (%)	No. of Subscribers
Dish TV	37%	9 million
DD Direct	25%	7 million
Tata Sky	14%	6.2 million
Sun Direct TV	14%	6.0 million
Reliance Big TV	5%	4.0 million
Airtel	4%	5.0 million
Videocon D2H	1%	2.5 million
Total	100%	28 million

Projection for Dec. 2010:
30 million subscribers

(Note: Some subscriber numbers were handwritten annotations on the original scan.)

Page 3 – Report by Research Firm / Media Partners Asia (MPA)

(Early 2010)

• Projected number of DTH subscribers by 2012:
  36 million
• Subscribers expected to be added during 2010:
  10 million

 

Observations of Samidha Sharma – TOI

• Huge subscriber base does not necessarily equal to greater revenue generation in the DTH industry.
• Mad rush to bring in new customers will continue for another 2–3 years.
• Competitive pricing has helped consumers shift from the 90 million–strong cable platform to the digital platform.
• The annual churn will go up by 10% to almost 35%.
• Competitive pricing coupled with low ARPU has crippled the industry, along with other regulatory issues.
• India is abysmally low on the ARPU front:
• US → $60
• Europe → $40
• Singapore → $20
• India → $4
• India is set to overtake the US to become the world’s biggest DTH market.
• Predatory pricing is eroding profitability.
• Competition is going to get tougher.

Strategies / Tactics Employed by DTH Operators to Win Subscribers

• Competitive pricing
• New connections in lieu of recharge requests
• Slashing prices of Set Top Boxes (STB) to sub-Rs. 1000 levels
• Differentiation by introducing high-definition boxes and digital video recorders (DVRs)
• Offering Value Added Services
  (e.g. 20 music channels for Rs. 20, by Videocon D2H)
• Bundling services
  (e.g. acquisition of Digicable by RCOM to bundle in):
• Cable
• DTH
• Broadband
• IPTV
• Bharti Telecom plans to integrate:
• Telecom
• Broadband
• DTH
• Embedding new services on a convergence format
• Geographical consolidation through acquisition of regional players

Quotes

Jehil Thakkar, Executive Director – KPMG

“The race for eyeballs is dominating the DTH industry right now as each player is trying to increase its subscriber base. The immediate goal is to drive up valuations by acquiring the highest number of customers.”

“There will be some players who will see the business as a drain on the overall profits of the group and may look to hive-off the DTH business.”

Tata Sky Spokesman

“We introduced the Rs. 999 entry price to give our customers the option to choose their own pack of channels. The idea was to give our customers the option which says no conditions apply.”

Sanjay Behl, CEO – Reliance BIG TV

“The prices are likely to stabilize for some times, but only till the next big wave of penetrative price intervention, which will be led by the digital cable industry.”

Salil Kapoor, CEO – Dish TV

“India will always be a low ARPU market but what we are looking at right now is to create a big base of customers. We want to keep acquiring new customers for a few more years and then focus our attention on unlocking value from these customers.”

Saurabh Dhoot, Director – Videocon Group

“We will increasingly look at introducing unique services like this one (20 music channels for Rs. 20 – Planet M), in order to improve revenues.”

Ajai Puri, Director & CEO, DTH Services – Bharti Airtel

“We plan to get the customer’s TV screens on his or her mobile and internet and that will be the big differentiator for us. TV will not be about linear watching anymore. It is bound to become more intelligent and integrated and that is where we have an advantage.”