Home >market >mark-to-market >Dish TV’s Arpu recovery not enough to signal a better picture

Dish TV India Ltd shares jumped 5.7% on Friday. The direct-to-home (DTH) company surprised the market with the average revenue per user (Arpu) it earned in the June quarter, which at Rs148 was around one-tenth higher than the March quarter. Higher HD (hi-definition) subscriber additions helped Dish TV’s Arpu improve in the June quarter to some extent, with low-value HD packs aiding the change.

But, is a higher Arpu enough to signal a better valuation? It’s worth noting that the June quarter Arpu is still lower than the September quarter’s Rs162 figure, which was the quarter before demonetisation happened. In the December quarter, Arpu stood at about Rs152.

Nonetheless, even as the sharp sequential recovery in Arpu is welcome, Dish TV’s net subscriber additions of 186,000 don’t impress. Ramadan falling in the last month of the June quarter moderated subscriber additions and recharges, which otherwise could have been even stronger, according to the company. “Involvement in the GST (goods and services tax) transition process during the last few days of the quarter also diluted some managerial attention towards the business," says Dish TV. In the full year, it intends to add one million subscribers on a net basis, lower than what it had guided at the time the March quarter results were announced.

Overall, Dish TV’s revenue and Ebitda increased 4.3% and 5.6%, respectively, compared with the March quarter. Ebitda margin increased, too. Ebitda is earnings before interest, taxes, depreciation and amortization.

What of the stock? Despite the increase in Dish TV’s share price on Friday, the stock has underperformed the S&P BSE 200 index by a wide margin so far this financial year. Unfortunately, from a near-term perspective, there is little to suggest a durable change in this trend.

Investors will look for further improvement in Arpu to ascribe brownie points. But the outlook isn’t rosy. Emkay Global Financial Services Ltd believes the launch of low-priced packages would continue to see acceptance, therefore restricting Arpu increase. As DTH firms vie for a bigger share of the pie in the last leg of digitization, competitive pressures are expected to be tough. “Dish TV’s >75% of subscriber base is rural, which impacts it the most as those subscribers continue to scout for low-end packages," added Emkay in a report on 17 August.

What will also matter for the stock are synergies from the Dish-Videocon DTH merger, expected to be completed by October. Dish TV expects approximate net synergies from the amalgamation to the tune of Rs180 crore in FY18 and Rs510 crore in FY19. The exact break-up of the synergies is not disclosed. How cost synergies actually pan out will be key for the stock. Investors should keep a tab on that.

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