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Sunday, April 14, 2013

Direct-to-home services set to get expensive

This story first appeared in DNA Money edition on Thursday, Mar 28, 2013.

Get ready to pay more for your direct-to-home (DTH) service if you are a monthly subscriber. Leading DTH service provider Dish TV is set to increase tariffs by 10% starting next week. Others are expected to follow suit.

“Yes, we are increasing pack prices across by 10% and the new rates will be applicable from April 4. The company has decided to pass on some part of the service tax component to subscribers and, hence, this decision to increase prices was taken,” said Salil Kapoor, COO, Dish TV.

The hike will be across packs and regions, including south India — price-sensitive market. Dish TV provides services with a basic pack price of Rs155 per month in south India and Rs200/month in the rest of the country. It believes the period after the March 31 deadline for phase two of digitisation offers a good opportunity for price hikes.

Dish TV had increased its set-top box (STB) prices twice in February and with the increase in monthly subscription fees, it expects average revenue per user (Arpu) to touch Rs180 next fiscal — from Rs160 in the quarter ending December.

Experts figure that others will follow suit, though most players are yet to decide on a hike. “I’ve heard about the price hike. We will first need to study the extent of price increase, and take a call based on our analysis and its impact in the market,” said Harit Nagpal, MD & CEO, Tata Sky Ltd.

Reliance Digital TV, too, said it is open to a hike. However, Airtel Digital denied any possibility of a price hike on STBs or subscriber packs.

The Indian DTH industry is a fast growing and highly competitive market with few differentiators in terms of content. Going by industry experts, the last few years have seen subscription prices drop consistently.

“My understanding is that it is a very fluctuating or volatile pricing market. While there have been instances of price hikes in the past, the number of times prices had to be reduced are more than they (prices) have increased,” said Nagpal.

Analysts tracking the DTH space feel any hike in monthly subscription fees will be good for the industry, besides helping add subscribers.

“It validates our thesis that Dish TV/other satellite players are changing focus towards profitable growth rather than only chasing subscriber additions,” Citi Research analysts Surendra Goyal and Aditya Mathur had said in a recent note.

Brokerage Emkay Research said the price hikes are inevitable, despite competition from cable operators. “Arpu increase is inevitable as multi-system operators will not be able to generate anticipated cash-flows at current revenue,” it said in a note.

A Reliance Digital TV spokesperson confirmed the push, saying the industry is heavily burdened with statutory levies (to the extent of around 35%) and the recent decision to increase the customs duty on STBs by 5% has only added to this burden.

Follow Ashish K Tiwari on twitter @ashishktiwari

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