Videocon-DishTV merger set to enjoy benefits of scale
DishTV is poised to benefit from the synergies with Videocon d2h as the content cost will get aligned
Last week, direct-to-home (DTH) operator DishTV India Ltd announced the completion of its merger with Videocon d2h Ltd. Announcing the merger, DishTV India’s chairman and managing director Jawahar Goel said that Videocon d2h and DishTV India had become one entity. “This amalgamation positions the new entity for exceptional future growth and profitability and puts on us the responsibility to lead the DTH industry in India to the next level.”
The merger paves the way for the creation of the largest listed media company in India. The combined entity, to be called DishTV Videocon, will serve more than 29 million subscribers. According to the Telecom Regulatory Authority of India, DishTV is currently the market leader with a 24% share (as of June 2017) while Videocon d2h has a 21% market share. Part of the Essel Group, DishTV has on its platform more than 600 channels and services.
According to a report by Axis Capital, DishTV is poised to benefit from the synergies with Videocon d2h as the content cost will get aligned. Currently, Videocon d2h’s per subscriber content cost is 20-25% higher than that of DishTV. The synergy will also lead to lower overheads, given the duplication of service centres, administrative costs, etc.
That is not all. The two together could lower the set-top box procurement cost. However, near-term challenges include relatively slower subscriber additions (two million per annum), limited Arpu (average revenue per user) growth and threat from digital penetration.
Ashish Pherwani, partner (media and entertainment) at consulting firm EY, agrees on the merits of the deal. “It’s a no-brainer with two large players coming together to create benefit of scale. The synergy will lead to high market share. Their negotiating capability with broadcasters will increase,” he adds.
While the new entity will be a behemoth which competitors in the DTH sector will have to contend with, the good news is that as the TV viewership monitoring agency Broadcast Audience Research Council (Barc) India widens it rural coverage, the importance of DTH firms will grow.
According to Mihir Shah, vice president at Media Partners Asia, “As Barc continues expanding its coverage, it has pushed up the value of rural reach for broadcasters, which today is primarily delivered through DTH. With this merger, the DTH market has consolidated with top three players accounting for 90% share of the paying subscriber base. These two structural developments will improve DTH’s subscriber economics in the coming year.” Media Partners Asia is a research firm focused on media, communications and entertainment industries.
Shah adds that the Warburg Pincus investment in Airtel Digital last year and now the Dish-Videocon merger going through serves as a confidence booster for the sector. “There are more than 50 million active subscribers on pay-DTH platforms and the market will add another 15 million paying subscribers in the next five years,” he says.
Interestingly, as the industry may see more consolidation—some of it between cable and DTH companies, or between broadband and cable firms—the over-the-top video streaming platforms may provide a challenge to DTH.
An earlier column had argued that DTH may be feeling the heat at the top end from video streaming firms—both international ones like Netflix and Amazon—as well as Indian ones like Voot, SonyLiv and Hotstar among others. This is because the affluent metro customers want to cut the cord and switch to binge-watching their favourite TV shows and originals on video platforms.
At the other end of the spectrum, private DTH firms are also being challenged by DD Free Dish, the free-to-air DTH platform from Doordarshan, which has made inroads in small towns and villages. Currently, DD Free Dish has 22 million subscribers, according to estimates by Barc India and the platform offers 80 channels including Hindi entertainment channels like Star Utsav, Sony Pal, Zee Anmol, Viacom18’s Rishtey and Rishtey Cineplex as well as news channels like Aaj Tak.
Of late, though, the fate of private channels on this platform is uncertain as the ministry of information and broadcasting has stalled the auctions which allotted slots to these channels on the platform. The buzz is that the auction policy is being reviewed and the ministry may allow the use of DD Free Dish platform on a revenue share basis. Broadcasters are dreading the move and feel that the proposal may be unviable for them.
Speaking to Mint earlier, Goel of DishTV India had said that although people are consuming media on streaming devices, DTH is more price competitive. The Axis Capital report, too, says that TV will continue to attract masses, while digital will draw premium eyeballs.
Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff. Respond to this column at firstname.lastname@example.org
Editor's Picks »
- Vectus Industries files Rs500-crore IPO papers with Sebi
- ICICI Bank appoints Sandeep Bakhshi as COO, Chanda Kochhar on leave till probe is over
- SGX case: NSE expects final decision on arbitration proceedings by February 2019
- Opinion: Why the Kashmir ceasefire during Ramzan was doomed
- FIFA World Cup 2018: Germany face uphill task after a rocky start
- RBI wants banks to discipline Indian corporates on working capital
- For stressed power assets resolution, patience is the virtue for banks, govt
- Exide’s valuation zooms as it claws back market share lost to Amara Raja
- Trapped in mid-cap stocks? What investors should do
- TCS share buyback shows absurdities of India’s repurchase rules