Dish TV still awaits boost in revenue per user

Despite consistent efforts, revenue per user has remained in a tight band for many quarters

Strong traction in its Rs 99 standard pack aided Dish TV's subscriber additions in the March quarter (Q4). It added 0.5 million subscribers in Q4 and ended FY16 with 14.5 million subscribers. As a result, Dish TV's consolidated revenues grew 9.5 per cent year-on-year to Rs 799 crore, in line with Bloomberg consensus estimate of Rs 797 crore, and subscription revenues grew 12.6 per cent to Rs 741 crore in Q4.

Despite this performance, the Dish stock fell 5.8 per cent to Rs 88. One reason could be the subscriber numbers were lower than that of its peer, Bharti DTH. While the Rs 99 plan enabled Dish TV to post its highest quarterly subscriber additions, it was lower than 0.62 million for Bharti DTH.

"With good additions across DTH (direct to home) players, Dish TV's performance will be compared to other DTH players rather than just its own forecast. We believe the performance bar for the company is going to be higher, seeing the pickup in the sector," says Abneesh Roy, analyst at Edelweiss Securities.

Dish's inability to scale up its Arpu (average revenue per user) is a key factor weighing on its stock. The company's Arpu has gone nowhere and moved in a band of Rs 170-174 in the past eight-10 quarters. Though Dish is pushing the growth of its high definition (HD) offerings, the low-Arpu offerings such as the Rs 99 standard pack and Zing (regional direct-to-home service) continue to drive subscriber additions for the company. This is restricting its Arpu growth. The Rs 99 standard pack formed 30 per cent of Dish's monthly subscriber additions and has been a prime driver of the same over the past three months. Additionally, higher service tax is limiting the company's ability to implement price hikes. Service tax has moved up from 12.36 per cent in August 2015 to 14.5 per cent currently. Thus, Dish's Arpu increased by only Rs 2 sequentially in Q4 to Rs 174.

Though the Q4 Ebitda margin grew at a healthy 237 basis points to 32.6 per cent, it was below analysts' expectations of 34-36 per cent. Ebitda is earnings before interest, taxes, depreciation, and amortisation. Net profit was aided by a tax income of Rs 403 crore in the quarter. Thus, the net profit grew 13.8 times to Rs 483 crore.

The firm remains confident of improving growth and profit. Arun Kapoor, chief executive, says, "We expect to (conservatively) add 1.5 million subscribers in FY17 and believe Arpus could grow three-five per cent in the year - the same as FY16." With FY17 to witness full-year impact of price hikes, it should aid Dish TV's Arpus and margins. The management believes it can push Ebitda margin to 35 per cent through cost efficiencies.