Q3 results: Dish TV sends a weak signal

Investors will closely monitor if the trends in subscriber additions and Arpu show signs of improvement


Till Tuesday, Dish TV India Ltd’s share had gained by 9% this fiscal year, doing quite well compared with a 12% decline in the broad market. But that changed on Wednesday, as its share fell by 13.13% in reaction to its December quarter results that were below expectations. Now, investors are sitting on a loss of 5%.

Lower-than-expected subscriber additions and virtually flat Arpu (average revenue per user) were the main disappointments. Dish TV added 317,000 net subscribers during the quarter. Kotak Institutional Equities and Motilal Oswal Securities Ltd had pencilled in an addition of 400,000 and 570,000 subscribers, respectively, in their estimates.

Not only did the company miss the mark, the December quarter marks a consistent decline in subscriber additions in this fiscal year. The measure for September and June quarters stood at 338,000 and 390,000 subscribers, respectively. According to an analyst, the appointment of a new chief executive officer and a late launch of an economical product offering may have led to comparatively lower subscriber additions.

Falling Arpus too are a concern. Dish TV’s Arpu at Rs.172 is only Rs.1 higher than the September quarter, coming as a big disappointment. A higher share of incremental subscribers coming from its lower Arpu product, Zing, aimed at customers interested in regional content, weighed on overall Arpu. “30% of incremental subscribers for the December quarter came from Zing,” said Rajeev Dalmia, chief financial officer of Dish TV, adding that the measure should not exceed 30% in future.

In the September quarter, incremental subscribers from Zing were 20-22%, according to Dalmia.

A combination of the above led consolidated revenue to grow 12% year-on-year to Rs.771 crore. Revenue growth for the first half of the fiscal year was higher at 17%. On the profit front, Dish TV’s net profit of Rs.68.5 crore looks remarkable compared with a loss last year. However, net profit is lower on a sequential basis on account of lower other income and higher depreciation. This is despite operating profit margin improving by half a percentage point over the September quarter to 34.4%.

What next? Investors will closely monitor if the trends in subscriber additions and Arpu show signs of improvement. The company maintains it will add 1.5 million net subscribers for the full year, which is at the lower end of its guidance. Even on the Arpu front, Dalmia maintains the company will exit the year at an Arpu of Rs.174. That’s not a material improvement from the December quarter Arpu. Post-results, investors have scaled down expectations, as reflected in the stock’s decline. The bland outlook for Dish TV’s business may hang over its share performance in the near term as well.

The writer does not own shares in the above-mentioned companies.

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