Vipin Bajaj - Televisionpoint.com | New Delhi If there's someone who would want to steer clear of the colour red at the moment, it will be the two national Indian biggies offering Direct-to-Home (DTH) services. Both Dish TV and Tata Sky are expecting embarrassing red blots to the tune of Rs 1500 crore for FY 2007-08.
The figure is close to reality with the fact that Dish TV India posting a net loss of 115 crore for the quarter ended March on gross operating revenue of 136.4 crore. However, Dish TV expects new revenue of Rs 50 crore this financial year from charging broadcasters to carry their channels on its service.
But ask Jawahar Goel, Managing director, Dish TV and Vikram Kaushik, CEO, Tata Sky, and they firmly refuse to press any panic buttons. "These are budget losses," the duo averred in unison, adding that the situation is pretty much under control.
While Goel and Kaushik may make light of the situation, experts in this industry opine that one of the major reasons for these humongous losses can easily be attributed to the subsidy that these providers have to give on selling individual set-top boxes or even the latest free set-top boxes offer made by Dish TV.
Besides, one also needs to factor in that DTH is a capital intensive industry and is at a very nascent stage in India. The challenge for existing players and new aspirants in the segment is to primarily set up the requisite infrastructure, which is both time consuming, and also calls for heavy investments.
Goel points out, "We're bleeding at this moment and have a long way to go, to reach the break-even point. Only then can we start thinking about expected returns."
Operators agree that despite being pro-technology, the government is playing spoilsport in their case and hence they are unable to curb the reds in their annual reports, which is also hampering future expansion plans.
Kaushik points out, "The burden of taxation on DTH players is very high," referring to the huge 56% tax that DTH subscribers have to pay as consumer tax. These include sales tax, VAT, excise duty, et al, over and above the 3% CST. Not to forget the 10% license fee and corporate tax that the government charges.
Of late, there has been some relief that has come their way in the form of a cut in the license fee on April 16, 2008 by the I&B ministry. The fee, which was earlier 10% has been brought down to 6%. However, operators consider the move as a mere drop in the ocean, given the deluge of taxes that they have to pay.
There's good news in the offing too. The government has expressed its keenness to roll out the second phase of CAS (Conditional Access System), and soon. When this happens, DTH companies can make maximum hay, as witnessed in the previous round of CAS implementation.
At the time, while the analog CAS was able to woo about 5,20,000 subscribers, DTH players managed to walk away with a booty of 6,00,000 subscriber additions. Tata Sky, which went into a marketing overdrive around the time (and even roped in Bollywood stud Hrithik Roshan as brand ambassador) was able to add over one million subscribers to its kitty, in merely a year of operations.
There's a caveat to these happy times though. CAS implementation in India has always been a contentious issue and implementing the 2nd phase will be no cakewalk.
"The first round of CAS was greeted with mixed experiences on the part of the government as well as the DTH operators," says Kaushik, adding that there are still a few loose ends that the government wants to work on before giving a green signal to the 2nd phase of CAS, which includes enacting and policing stringent compliance norms.
Besides, if and when the 2nd phase of CAS is implemented, Tata Sky and Dish TV will not be the only players vying for consumer attention. Sun TV's DTH arm, Sun Direct, has already spread its wings in the north Indian market, the stranglehold for these two biggies.
Says Tony D'Silva, COO, Sun Direct, "We still have issues in getting appropriate content to appease the North Indian market, but there are far greater South Indians in North India than North Indians in South India, which is a huge market that we are looking at."
Besides, players like Reliance and Airtel are keenly waiting in the wings for this second round of CAS. Given enhanced competition, the fight for subscriber attention will be supreme and players would have to shell out big money on promotions, further underlining the red on their balance sheets.
Be that as it may, the fact remains that the DTH market in India is hopelessly under-potential as of now, with merely 5-6 million subscribers including viewers of Direct TV, offered by DD, in a country of over 71 million cable and satellite homes.
Says Prakash Bajpai, President and CEO, Home and enterprise business, Reliance Communications, "There's space for all. Competition has always been good for the industry. See what it has done for the telecom sector," adding that the more the number of players, the more faster the entire segment will grow.
Agreed competition has played a vital role in making India the second largest telecom market till date, but the government has played an active role to make telephony popular and affordable. If DTH too wants to trot on the same path, political will and support would be a major prerequisite. In fact, the DTH Operators Association of India – DOAI, has been designed to be that combined voice of the industry, which will enable them to lobby to improve their lot.
The Telecom Regulatory Authority of India (TRAI) has also come to the aid of the sector, with a suggestion that broadcasters should offer a la carte system to DTH operators, allowing customers to subscribe to individual channels (as opposed to bouquets), making it more cost effective.
TRAI also suggests that broadcasters charge 50% less from DTH operators in comparison to cable in non-CAS areas. If implemented, DTH players are likely to become more cost competitive vis-à-vis analog viewing. Until then, the colour will remain red, and not out of choice.
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