Should you dump stocks of broadcasters, DTH players post Trai regulation?

According to the new guidelines, customers will have a choice to select and pay for only those channels that they want to watch, instead of paying for the entire pack imposed by the DTH players.

The Telecom Regulatory Authority of India's (Trai) latest order on broadcasting and cable services that came into force on February 1 is more about offering options to customers rather than being pocket-friendly, analysts say.

According to the new guidelines, starting February 1, customers will have a choice to select and pay for only those channels that they want to watch, instead of paying for the entire pack imposed by the direct-to-home (DTH) or cable TV operators.

Though analysts have welcomed the move as it will bring transparency and options for customers to choose a la carte channels or bouquets, they feel the customers may eventually end up paying more. 

"If a customer wants to watch only six channels, then it is beneficial for her as she will pay only for those  six channels. But, if one chooses five channels and out of that, four were already available in the existing pack and along with that they had an option of exploring, surfing multiple channels, what was bad in that," says an expert requesting anonymity.     

IMPACT ON DTH/CHANNELS

Most analysts are of the view that there won't be any substantial decline in the companies'revenue as the move is subjective in nature. Instead, the new order may see the companies get more aggressive as regards their pricing structure and target more customers to increase market share. 

Stock prices of most of the channels and operators have fallen sharply in the last one year. Going forward, these stocks may see a knee-jerk reaction once the new rules are in place, analysts say. 

"The new rules will see average revenue per users (ARPUs) increasing; however, at the same time it will also increase the churn rate in the customers' base. The new regulation will be positive for DTH players in the long-term, but will hurt MSOs," says Sanjeev Hota, AVP Research at Sharekhan, by BNP Paribas.  

"On the technical front, shares of Sun TV are trading under pressure and we expect a downside target for Rs 480 levels while Rs 15 levels for DISH TV for the short term ahead," said Dr Ravi Singh, head of research at Karvy Broking.

Among the lot, analysts remain bullish on Zee Entertainment despite the recent developments. 

"We believe medium-to longer-term performance still depends on the strategic partner deal structure, which is still uncertain. We revise to Buy from Accumulate citing inexpensive valuations, with a new target price of Rs 490 from Rs 535 on 23x (from 25x) FY20E P/E — a slightly lower multiple after factoring in the uncertainty. Our earnings estimates remain unchanged," say analysts at Elara Capital.

Here's how stocks have performed in the last one year -

Company Name	Date	Closing price	Date	Closing	% change
BAG Films & Media Ltd.	01-Feb-2019	4.44	01-Feb-2018	5.58	-20.43
Balaji Telefilms Ltd.	01-Feb-2019	89.30	01-Feb-2018	145.75	-38.73
Colorchips New Media Ltd.	01-Feb-2019	67.35	01-Feb-2018	395.00	-82.95
Den Networks Ltd.	01-Feb-2019	71.75	01-Feb-2018	106.75	-32.79
Dish TV India Ltd.	01-Feb-2019	24.40	01-Feb-2018	77.30	-68.43
Entertainment Network (India) Ltd.	01-Feb-2019	567.15	01-Feb-2018	721.05	-21.34
Hathway Cable & Datacom Ltd.	01-Feb-2019	32.00	01-Feb-2018	38.30	-16.45
Music Broadcast Ltd.	01-Feb-2019	298.50	01-Feb-2018	387.95	-23.06
New Delhi Television Ltd.	01-Feb-2019	35.00	01-Feb-2018	42.15	-16.96
Ortel Communications Ltd.	01-Feb-2019	4.40	01-Feb-2018	31.55	-86.05
Raj Television Network Ltd.	01-Feb-2019	50.65	01-Feb-2018	57.85	-12.45
Sahara One Media & Entertainment Ltd.	29-Jan-2019	19.45	01-Feb-2018	52.00	-62.60
Siti Networks Ltd.	01-Feb-2019	6.25	01-Feb-2018	22.55	-72.28
Sun TV Network Ltd.	01-Feb-2019	532.15	01-Feb-2018	1012.90	-47.46
TV Today Network Ltd.	01-Feb-2019	351.60	01-Feb-2018	452.65	-22.32
TV Vision Ltd.	01-Feb-2019	3.18	01-Feb-2018	20.80	-84.71
TV18 Broadcast Ltd.	01-Feb-2019	32.65	01-Feb-2018	59.70	-45.31
UFO Moviez India Ltd.	01-Feb-2019	247.50	01-Feb-2018	456.10	-45.74
Zee Entertainment Enterprises Ltd.	01-Feb-2019	356.50	01-Feb-2018	595.10	-40.09
Zee Media Corporation Ltd.	01-Feb-2019	13.14	01-Feb-2018	43.70	-69.93