Dish TV India dishes out a subdued June quarter

Even though the company intends to effect another round of price hike during Diwali, meeting the Arpu growth guidance could be challenging

Graphic: Naveen Kumar Saini/Mint
Graphic: Naveen Kumar Saini/Mint

Dish TV India Ltd’s June quarter performance hardly moves the needle for the stock. The DTH (direct-to-home) services provider’s share price went up marginally on Thursday when results were announced, a day when the Sensex closed slightly higher.

The average revenue per user (Arpu) at Rs.174 for the June quarter remained unchanged, compared with the March quarter, despite a price increase. Arun Kapoor, chief executive officer, Dish TV, says the company effected an average 4-5% price hike in packs in March, but that did not translate into better Arpus for the June quarter as it takes time for people to get used to it. Also, there was some downgrading that happened. Still, for the year as a whole, Arpu is expected to grow 3-4%, adds Kapoor. Even though the company intends to effect another round of price hike during Diwali, meeting the Arpu growth guidance could be challenging.

Dish TV’s consolidated revenue increased 5.7% over the same period last year to Rs.779 crore. However, starting 1 April, the company changed its accounting of entertainment tax in keeping with industry practice. Earlier, entertainment tax was a part of operating expenditure; it is now netted off against subscription revenues. According to the company, on a like-to-like basis, revenue growth is 10.9%, compared with last year.

To that extent, netting off entertainment tax from revenues did boost reported earnings before interest, taxes, depreciation and amortization (Ebitda) margin. The measure showed a 200 basis points expansion to 34%. But, on a like-to-like basis, Ebitda margin has improved only slightly. Further, a free cash flow of Rs.62.7 crore in the June quarter is lower than the Rs.104.7 crore notched up in the March quarter. One basis point is one-hundredth of a percentage point. Dish TV did well on the subscriber additions front, adding 402,000 subscribers. The company met its guidance of 1.5 million net subscriber additions in fiscal 2016. For the current fiscal year, Dish TV has a target of 1.5-1.9 million net subscriber additions. That shouldn’t be an issue. If one assumes the June quarter subscriber addition run rate for the rest of FY17, then it would comfortably surpass the lower end of the guidance.

Overall revenue growth guidance is 12-15%. Dish TV shares have underperformed the BSE-200 index since the beginning of the calendar year. One factor that could change the trend is better Arpus and a better Ebitda margin, considering the company has provided a guidance for 35% Ebitda margin for FY17. Investors would do well to watch those parameters in the coming quarters.