India’s pay-TV industry backed

A report to clients from PINC Research firmly backed the nation’s cable and DTH TV sector on the dawn of the New Year which sees the industry adopt major structural changes, switching to an all-digital delivery system.

PINC Research initiated its coverage on the sector, with a ‘buy’ recommendation on three cable and DTH players, Hathway Cable, satellite broadcaster DISH TV, and DEN Networks, in a December 26, 2011 research report.

“The Indian Cable & Satellite(C&S) industry, the third largest in the world, with 136 million C&S homes is all set for a revolution as the long-expected ‘digitisation’ becomes a reality. Currently there are 41 million DTH homes and 6 million Digital cable homes (35 per cent penetration in C&S homes). Going forward digital subscriber base is expected to rise from 47 million to 83 million by 2015, increasing at 21 per cent CAGR (2012E-2015E). An industry of Rs270 billion will no longer operate under obsolete analogue distribution business post digitisation. The long standing local cable operator (LCO) ‘underreporting’ issue will get resolved with the gradual roll out of digitisation as per the sunset clause. Aggressive marketing and promotional offers by DTH players adds to the growth factor of the industry.”

“C&S industry is set to expand to 166 million with 64 million DTH and 20 million digital cable gross subscribers by 2015E. Aggressive subscriber acquisitions by the well funded six DTH players have kept the digitisation momentum alive. Now with compulsory digitisation MSOs and LCOs are left with ‘no choice’ in the face of increasing threat from DTH. We believe with Government-mandated digitisation, the well funded national MSOs and DTH players are all set to capture the opportunity.”

“Currently the C&S industry is largely run under the outdated analogue mode of distribution which has resulted in a highly fragmented value chain and allowed last mile operator to corner ~80 per cent of the subscription revenue. With compulsory digitisation, economic retention will be the crucial driver in value creation. Curbing of revenue leakages will be the main growth factor for C&S industry to register 10 per cent CAGR over 2012E-15E. Out of which we expect 47 per cent CAGR in digital cable revenue over 2012E-15E.Digital cable players will benefit with increased portion of retained gains of compulsory declaration, which would drive a 3x rise in revenues. DTH subscription revenue is estimated to show 22 per cent CAGR during 2012E-15E. Digitisation is bound to reduce the incidence of under-reporting – the bane of the Indian C&S industry. High operating leverage business model will be the key driver for organised cable players and DTH operators in magnifying their operating margins. We see major players in DTH segment and organized MSOs to breakeven by 2013.”

“Structural change in cable distribution and DTH ramp up makes us positive on the Indian C&S Industry and we initiate coverage on the sector, with a ‘BUY’ recommendation on Den Networks, Dish TV and Hathway Cable,” says PINC Research report.

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