Monday, June 7, 2010

DTH cos struggle to pick right signals

Recently it was reported that the six DTH players launched a marketing blitz costing Rs 1,000 crore. The idea is to hasten the adoption of digital TV in the country.

While its impact on the financial fortunes of the DTH operators — most of whom are bleeding — is still a mystery, the move has brought a smile on the faces of cable companies. They believe that a marketing push by DTH operators touting the benefits of digital services over analogue may convince local cable operators and make customers switch to digital cable services.

Den Networks, for instance, claims that the marketing campaign would help it increase its subscriber base by two times to 20 million in the next 12-18 months. So far so good, but the investors of stocks in cable companies remain disappointed.

With the exception of Den Networks, which has given around 23% returns in the past six months, stocks of all listed cable companies — Hathway Cable & Datacom and Wire & Wireless — have disappointed their investors. Even on the operations front, these companies — except Den Networks, thanks to its higher average revenue per user (ARPU) — are yet to make good profits. This is despite the fact that the combined subscriber base for all six DTH firms currently stands at 24 million while there are at least 85 million cable homes in the country.

The main hurdle for the cable companies is to convert their free-to-air viewers into pay-channel mode — which is a key revenue driver for the industry. This has resulted in lower ARPU for many cable companies. At the time of its initial public offering, Hathway Cable had an ARPU of around Rs 55.8 per month at an estimated subscriber base of 8.2 million while its immediate peer, Den Networks, had an ARPU of around Rs 150-160 per month at an estimated subscriber base of around 10 million.

Another concern for the industry is a slowdown in the growth of TV households. A report from one of the leading auditing firms predicts that the number of TV households would grow at just 2.7% annually over 2009-13 to 135 million.

The report also states that the number of cable households would grow from 71 million in 2008 at just 2.4% annually from 2009 to 80 million by 2013. Besides, this slow growth in their subscriber base, cable companies continue to invest in new equipment and technology to offer world-class experience to their subscribers at a competitive price.

This would be a major challenge for cable companies even as they acquire newer subscribers through local cable operators and digitise them.

Courtesy - Economic times

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