DTH and Cable TV services in India

The markets have over-reacted to TRAI's recommendation of complete digitization by 2013 has been felt by Equity analysts. Stocks in the cable distribution and DTH business, DEN Networks, Hathway Cable and Dish TV saw gains in excess of five per cent each. These gains are not sustainable and only DTH operators would collect the benefits of complete digitization, as individuals feel it is an irritant to cooperate with local cable operators, said a forecaster from a large broking house. DTH service operators like Tata Sky, Dish TV and Reliance Big would be doing well as it has already been proved beyond doubt that fixed CAS (conditional access system) achievement has not worked.
It has been said that "Every geography does not support DTH and hence cable operators will survive side by side. Though the TRAI recommendations have been made, implementation is still some time away,"
Market service providers are gung ho about the implementation of digitization. The market player feel the waiver of customs duty on set top boxes for three years coupled with an eight year tax holiday will benefit all DTH providers - broadcasters, distributors and MSOs (multi system operators). "Whatever the will be the ratio of cable to DTH, it will benefit all players in the market. Even the government envisages collecting approximately Rs 1,400crore in the form of service tax, against the existing Rs 75crore. This would be backed by a slowly increase in ARPU (average revenue per user) and an important raise in declaration levels that was useless erstwhile. The Consumers are also freely shifting towards CAS given the quality of reception.
The first choice seems to be CAS wherever the population density is high and DTH service in far flung areas. One cannot unnecessarily replace cable with DTH for the simple reason that cable is very competent and can also maximize to deliver broadband and telephony services (if regulations permit). When companies with low announcement levels could register a gross margin of 30 per cent, this movement towards digitization would surely provide a boost to existing players in the market and a 50 per cent margin would not idealistic to imagine, this is because the business operates on a primarily fixed cost model with one time expenditure and slowly increasing annuity income.
The recommendations have shown a financial support requirement of Rs 55,000- Rs 60,000crore for full digitization across India. This would be involving large scale funds being raised by overseas through the FCCB/ECB/GDR route by companies. The cable broadband business is in the same stage of progress in India that telecom was 10 -12 years ago and therefore the entry of large players in market with rich pockets into this business is about to happen. DEN Networks, Hathway Cable and Datacom, and Dish TV closed 12.29 per cent, 8.53 per cent and 6.19 per cent over their respective earlier closing prices to close at Rs 237.25, Rs 211.95 and Rs 49.8 on the NSE.

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