Results improve, but subscriber additions slow at Dish TV

Dish TV India Ltd delivered good numbers on the operating front for the March quarter. The company’s operating profit margin stood at 27.5%, higher compared with the same period last year and also higher against the first three quarters of the last fiscal year.

The reasons for the better operating performance include a decline in commission expenses (both year-on-year and sequentially) and a 7% sequential decline in content costs. Dish TV’s revenue growth in the March quarter was decent, too, and increased 7% over the December quarter to Rs 525 crore.

Revenue includes subscription to the tune of Rs 434 crore. According to Salil Kapoor, chief operating officer at Dish TV, “The remaining revenue includes bandwidth charges and advertising revenue.”

However, new subscriber additions were slow in the March quarter. The company added 420,000 subscribers in the quarter, which is the lowest number of new subscribers added, when compared with the first three quarters of the last fiscal year.

The sequential trend in Dish TV’s average revenue per user (Arpu), too, is not very exciting. For the March quarter, Arpu came in at Rs 151, lower than the Rs 152 reported in the December quarter (which itself was flat compared with the September quarter). According to Kapoor, Arpu improved to Rs 153 in FY12 from Rs 142 in FY11.

Of course, the company continues to make losses at the net level. For FY12, the stand-alone and consolidated loss stood at Rs 159 crore and Rs 133 crore, respectively.

Dish TV maintains that a foreign exchange loss of Rs 51 crore affected last fiscal year’s profitability although, compared with the previous year, reported losses at the net level have reduced. The company posted a loss for the March quarter as well.

According to Dish TV’s earnings release, the company is now free-cash-flow positive. That could offer some comfort to investors. Operating profit margin for FY12, too, has improved considerably at 25%, compared with 17% in FY11.

Meanwhile, the Dish TV stock has done better than the benchmark Sensex. In the last fiscal year, Dish TV fell 5%, against an 11% decline in the BSE Sensex. But the stock has also fallen by as much as 41% from its high in the last one year. True, current valuations appear attractive and the company is also in a sweet spot to benefit from digitization. However, higher competitive intensity remains one of the main concerns for the industry and Dish TV is no exception to that.

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