FICCI-KPMG-Report-13-FRAMES

The power of a billion: Realizing the Indian dream
17
Cable retains approximately 80 percent of
analogue subscribers
Conversion of analogue cable subscribers to digital cable
was not expected to take place without some churn to
DTH providers. However, MSOs demonstrated strong
performance, and the analogue subscriber churn to DTH
is estimated at approximately 20 10 percent during Phase
I, which was lower than industry expectations. Industry
discussions suggest that metros have traditionally been
strongholds of cable providers with a higher presence
of large national MSOs, which may have helped cable
retain most of its subscriber base. Further, newly digitised
subscribers appear to be currently paying analogue-level
ARPUs, providing a cost advantage over DTH.
“
MSOs may take a while to get their act
together in terms of mapping their true
subscriber base and launching packages.
This will take most of this year. At present,
DTH accounts for the larger share of paying
digital subscribers in Phase 1 cities.
Scan the QR code to hear more from Harit
“
- Harit Nagpal
Managing Director & CEO,
Tata Sky
Overall, the DTH industry added approximately 7 million
to its subscriber base in 2012, versus 9 million in 2011. The
decrease in free viewing period from about 5 months in
2010 to 1 month in 2012 may be one of the reasons for the
muted growth.
“
Mostly all DTH Companies, including
Videocon D2H are EBITDA positive.
However due to constant investment in the
future by way of subscriber acquisition,
the bottom line is impacted. Same would
be better understood by differentiating
between past operating performance and
future investment impact.
Digitised, but not addressable
Our discussions with industry participants suggest that
while homes in Phase 1 have been seeded with STBs
as indicated above, these homes are not necessarily
addressable.
Industry discussions suggest that LCOs have acquired
boxes in bulk from MSOs, and are holding back the identity
of end-customers. Using a combination of penalties to
LCOs and incentives to end-customers, MSOs are in
the process of collecting Know-Your-Customer (KYC)
information, verifying the same, consolidating their
subscriber base, and updating their systems. This process
may be completed by the second half of 2013, bringing in
addressability.
MSOs are, however, aware of the number of boxes seeded,
and hence the true subscriber base. While they are billing
LCOs for this true base, collection remains a challenge.
An identification of the end-customer, and subsequently,
movement to the pre-paid model is therefore viewed as a
key step in improving collection.
10. Industry discussions conducted by KPMG in India
“
- Rohit Jain
Deputy CEO,
Videocon D2H
“
The good part is that we know the number
of boxes that are lying with LCOs and we
are billing them for every set-top box, albeit
on a “wholesale” basis. The tough part is
that cash collection remains a challenge,
and in that sense, it will take a few quarters
before the upside from Phase 1 digitisation
can kick in.
“
- Jagdish Kumar
CEO &MD,
Hathway Cable & Datacom Ltd.
Easing in of consumers – All on the ‘highest
pack’ for now
In the process of digitisation, while STBs have been seeded
by MSOs, and the consumer has started receiving digital
signals, packages have not yet been deployed. Essentially,
the consumer is receiving the full portfolio of channels from
their MSO (barring a few exceptions such as some regional
channels, which are made available upon request). Industry
discussions suggest that the ARPU at the consumer’s
end has not increased materially – the customer is still
paying analogue rates. Industry discussions suggest that
maintaining the status quo on ARPUs may be one of the
factors that helped MSOs retain a large share of their
analogue subscriber base.
We also note that at current ARPU levels, most of the
newly digitised customers would qualify for a ‘base pack’.
Hence, it is likely that the consumer may have to pay more
for the same set of channels or may not get all the channels
at the earlier price. In such a scenario, cable TV operators
will have to aggressively compete with DTH operators to
retain their subscriber base, while providing the customer
with a better value proposition.
Discussions with MSOs suggest that while packages have
been designed, and information regarding packages and
pricing has been passed on to customers, deployment of
packages will be done post verification and consolidation of
their subscriber base.
While MSOs appear to be optimistic about deploying
packages by April 2013, the larger industry believes that this
process may get done sometime in the second half of 2013.
Deployment of packages, being a way to differentiate the
customer base, is a key driver to raise ARPU.
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