Dish TV reports strong subscriber additions, but issues subdued guidance

Arpu growth, subscriber additions and Ebitda margin performance in the coming quarters will determine the course of the stock


The company has increased prices across most of its packs in north and south India by around 4-8% with effect from 22 March.
The company has increased prices across most of its packs in north and south India by around 4-8% with effect from 22 March.

After disappointing investors on subscriber additions in the December quarter, Dish TV India Ltd has upped its game remarkably in the March quarter. The DTH (direct-to-home) services provider’s net subscriber additions last quarter stood at 508,000, much higher that the December quarter’s 317,000. Commenting on subscriber additions during the quarter, the company said that its advertising campaigns had the desired impact while the specially designed sports packs ensured that sports fans didn’t go elsewhere during the cricket season.

But investors weren’t enthused. The stock fell nearly 6% on Monday when results were announced. To be sure, till Friday the share price had gone up by about 40% from its 2016 closing low, seen in February. Accordingly, some analysts attributed part of Monday’s decline to profit booking. Nevertheless, despite impressive subscriber additions for the fourth quarter, the management’s forecast of 1.5 million net subscriber additions for the current fiscal year is hardly encouraging. In fact, the lower end of FY16 guidance was the same, which the company did meet. Analysts working with higher subscriber additions for FY17 will now have to prune their numbers.

Secondly, for the quarter, consolidated Ebitda (earnings before interest, taxes, depreciation and amortization) margin at 32.6% was 178 basis points lower compared with the December quarter. Expectations were higher. For instance, Motilal Oswal Securities Ltd and Kotak Institutional Equities had forecast an Ebitda margin of 36% and 34.8%, respectively. A basis point is one-hundredth of a percentage point.

Higher-than-anticipated programming/content costs; and increase in other expenditure impacted the Ebitda margin. Still, a spike in other income and a slight decline in finance costs helped Dish TV report 17% sequential growth in pre-tax and exceptional item earnings to Rs.80 crore.

Meanwhile, Arpu (average revenue per user) for the March quarter was Rs.174 compared with Rs.172 in the December quarter. That’s not bad, considering that an increase in service tax and rising share of low-priced products had made Arpu growth challenging in recent times.

The company has increased prices across most of its packs in north and south India by around 4-8% with effect from 22 March. This should support Arpu growth to some extent. Dish TV is looking at 3-5% Arpu growth this year. That, along with subscriber additions and Ebitda margin performance in the coming quarters will determine the course of the stock.

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

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