Dish TV: Reliance Jio concerns overstated

Analysts don't see big change in TV consumption in near to medium term

The Dish TV stock has outperformed the benchmark S&P BSE Sensex over the past one month and gained nine per cent, against a return of about two per cent for the index. This surge was fuelled by a host of positive news, and has helped the stock regain the sharp decline seen in August. There is a buzz on the street that Dish could ink a merger deal with Videocon D2H which could bring in multiple operational synergies and create the country’s largest TV content distributor. However, both the companies have denied this.

Also, the concerns surrounding a negative impact on direct-to-home (DTH) and cable companies post the foray of Reliance Jio in this space seem to be far-fetched. In fact, leading brokerage Citigroup recently said the impact of Jio’s entry could be very gradual and not material enough to make much difference to Dish TV. “We don’t expect a material change in TV viewing habits in the near and (even) medium term; moreover, given the relatively low priced C&S TV offerings in India (unlike many developed markets), consumer churn could be limited in our view,” wrote Citigroup analysts, headed by Aditya Mathur, in a report.

The Jio app which has sourced content from various broadcasters, movies, magazines, amongst others is available free to its subscribers till December 2017 and analysts estimate its annual subscription fee will be higher than the average ARPU (average revenue per user) of Dish, which was Rs 172 a month as on March 31, 2016.

While the app could shift some consumers to view content on mobile, analysts say this shift is likely only for short-duration content. And customers, who subscribe to mobile data packages, are unlikely to completely switch from TV. However, they are likely to use both the media.

“Given the time spent by Indians on TV, we think consumers may have to adopt 35/60GB pack costing Rs 2,500/Rs 4,000 just for data from Jio,” added Mathur.

Dish’s prospects appear healthy. Bloomberg analysts’ consensus estimate says Dish’s consolidated earnings per share will grow at a healthy 31 per cent in FY17. The company’s net debt is expected to fall by almost half, 48 per cent, this fiscal to Rs 421 crore and by over Rs 300 crore in FY18 and will rub off favourably on its profitability. While healthy subscriber additions will drive growth, the street will watch out for any improvement in the company’s ARPU. Overall, the street remains positive on the stock and on an average expects upside of about 12 per cent from current levels.