Dish TV plans domestic sourcing of set-top boxes to offset rupee drop

This story first appeared in DNA Money edition on Monday, Aug 12, 2013.

Dish TV, India’s top direct-to-home (DTH) operator, is considering domestic sourcing of digital set-top-boxes (STBs) to offset rising costs due to rupee depreciation.

A flagging rupee has been an industry-wide concern for a while now, calling for efforts to control the related impact on business, the company’s top official said.

Jawahar Goel, managing director, Dish TV India, said on a recent analyst call, “Given the depreciating rupee, we are evaluating possibilities for improvement in hardware economics of consumer premises equipment (CPE) sourced from India. We have also been considering options with our overseas suppliers to commence production at a base in India.”

Last month, Dish TV had taken a price hike of `250 per STB to bridge the widening gap between cost of CPE and the amount realised from the customer.

Other DTH players such as Tata Sky, Airtel Digital and Reliance Digital followed suit by increasing prices broadly in the same range.

Also, in this year’s Budget, Union finance minister P Chidambaram had hiked customs duty on imported STBs from 5% to 10%. Considering there aren’t many domestic manufacturers of STBs for the digital cable and DTH sectors, the government’s decision to make imported STBs expensive was seen as a move to incentivise domestic manufacturing and bringing more players in the market.

Among the few local STB manufacturers are Noida-based Dixon Technologies, Kortek Electronics and Videocon Industries. International players including Hampshire-based Exset are understood to be exploring tie-ups with Indian manufacturers to produce STBs here.

Industry experts said Dish TV’s move to source STBs locally may be followed by other players, experts said.

“We have a hunch that in the near future there can be a higher duty on import, because of the balance of payment issues. In fact, we have already alerted our vendors to set up shop, to convert and produce the STBs locally. We are not buying new STBs for next 3-4 months as we have enough stock. And by that time the vendors are likely set up shop in India,” said Goel.

Dish TV currently has an inventory of 1.4 million STBs and another 0.6 million with the channel partners. At `60 a dollar, the total cost of the CPE, company officials said, is close to `2,700 for a standard definition set. DTH players have been offering STBs at a subsidised cost to attract subscribers but are gradually expected to move towards a zero-subsidy model by increasing prices. Commenting on the possibilities, R C Venkateish, CEO, Dish TV India, said,

“We are moving towards elimination of subsidies in the next one to two years. So certainly a combination of efforts to reduce costs as well as increase prices will be used. Local manufacturing will play a crucial role towards this. While it is not a very big chunk, even a couple of hundred rupees of savings will go further towards reduction of subsidies.”

He said the company is focused on increasing value delivery to the customer and is coming up with innovations. “New products will be introduced in the second half, which will further position us separate from cable,” he said.