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DTH players bite cost bullet as competition hots up

The DTH market has seen a rapid growth thanks to aggressive players with deep pockets like Reliance ADAG and Bharti entering the space, reports Saurabh Turakhia.

india Updated: Nov 12, 2008 21:57 IST
Saurabh Turakhia
Saurabh Turakhia
Hindustan Times

The DTH market has seen a rapid growth thanks to aggressive players with deep pockets like Reliance ADAG and Bharti entering the space. However, the industry is facing mounting losses and struggling players are preparing to pass on at least a share of the increased burden to customers.

“We will pass on the burden of service tax (12.5 per cent) to the consumers from December 1. Additionally, we will also consider passing on the entertainment tax (varies from state to state) to the consumer beginning January 2009,” Jawahar Goel, managing director of Dish TV told Hindustan Times.

“It’s too premature to discuss future price hikes,” said Tata Sky’s CEO and managing director Vikram Kaushik. However he admitted: “Of course, the price war has started earlier than it should have and the rupee depreciation has made the import of set top boxes costlier.”

Goel agreed: “Earlier, our subscriber acquisition cost was Rs 2,200 but because of the rupee depreciation, it went up to as much as Rs 2,600.”

Dish TV’s operating losses for the quarter ended September 2008 stood at Rs 136.87 crore as opposed to Rs 82.8 crore for the quarter ended September 2007. Its losses for the year ended March 31, 2008 stood at Rs 368 crore. Tata Sky is not a listed company and was not willing to share its revenue.

But, both Goel and Kaushik agree that this is an investment phase and that growth is more important right now.

“All the losses are planned ones. It’s an industry whose payback periods have known to be long,” said Kaushik.

The industry is going through a time of aggressive growth, no doubt. “Last month itself, the industry collectively added 800000 subscribers”, said Salil Pitale, head of telecom and media at ENAM investment banking.

While Dish TV has managed 3.94 million subscribers till September 2008 and expects to break even when it reaches 6 million subscribers, Tata Sky’s subscription base is slightly below the 3 million mark. Reliance’s Big TV has acquired 5 lakh subscribers.

However, the twin forces of price erosion and cost escalation have been hurting the financial health of existing players. To acquire maximum subscribers, introductory offers starting Rs 1,490 (free subscription for three months plus installation) have been doled out and prices have been slashed.

First Published: Nov 12, 2008 21:54 IST