Digitisation bill signals growth opportunity for DTH companies

With the Parliament approving the Digitisation Bill recently, cable, especially, multi-specialty operators and Direct to Home, or DTH, companies are expected to grab a higher market share from local cable operators, who are reported to declare lower subscriber numbers and in turn revenues.

Companies such as Den Networks, Hathway Cable and Datacom, Wire & Wireless India, and Dish TV India are among the companies that may see potential revenue improvement over the next year or two.

The new law envisages digitisation in four phases. In phase-I, by June next year, it is expected to roll out in four metropolitan cities. In phase-II, cities with a population of over one million, the aim is to ensure digitisation by March 2013.

Phase-III and IV would have a timeline of digitisation in other urban areas and the rest of India till the end of 2014. There are over 116 million cable television homes, of which 39.5 million are digital subscribers. That would mean huge investments by the industry for converting such a huge subscriber base.

It is estimated that the total investment required for complete digitisation would be close to Rs 18,000 crore. Among the listed players, Den Networks, Hathway Cable and Datacom raised close to Rs 1,030 crore through initial public offering.

A substantial portion of these funds is being invested in acquiring multi-specialty operators, or MSOs, and then digitising the subscribers' base of these MSOs. Taking into account the investment of Rs 18,000 crore for complete digitisation and breaking it down over four years, it would mean an investment of Rs 4,500 crore annually till 2014.

In such a scenario, there may well be consolidation. That may be possible given that most companies have enough room to opt for debt. Hathway Cable, Datacom and Den Networks have a debt to equity ratio of less than 1, leaving enough scope for these companies to raise debt.

Dish TV India, with its first mover advantage, has a market share of over 30% of digital subscribers with a cash and bank balance of Rs 251 crore on its books. The company's board has approved a proposal to raise $200 million through an equity offering to foreign investors recently.

This should help the company in terms of acquiring subscribers and managing costs associated with it. Den Networks, Hathway Cable & Datacom are trading at a discount of 71% and 34%, respectively, to their past one year prices, while Dish TV India is trading at a discount of close to 8% to its yearago price.

Source: http://cablequest.org/news/dth-news/item/465-digitisation-bill-signals-growth-opportunity-for-dth-companies.html
Source: http://cablequest.org/news/dth-news/item/465-digitisation-bill-signals-growth-opportunity-for-dth-companies.html