dish tv india limited · investment rationale 4 1 poised to be the largest media company in india 2...
TRANSCRIPT
Disclaimer
Some of the statements made in this presentation are forward-looking statements and are based on the current beliefs, assumptions, expectations, estimates, objectives and projections of the directors and management of Dish TV India Limited about its business and the industry and markets in which it operates.
These forward-looking statements include, without limitation, statements relating to revenues and earnings. The words “believe”, “anticipate”, “expect”, “estimate", "intend”, “project” and similar expressions are also intended to identify forward looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the control of the Company and are difficult to predict.
Consequently, actual results could differ materially from those expressed or forecast in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, changes in the regulatory environment and other business and operational risks. Dish TV India Limited does not undertake to update these forward-looking statements to reflect events or circumstances that may arise after publication.
3
Investment rationale
4
Poised to be the largest Media Company in India1
Significant merger synergies to be realised. Maiden dividend declared in 2Q FY192
At an inflection point; on course to deliver strong growth and margins3
Forthcoming, powerful integration of in-house OTT with DTH to increase urban stickiness
4
Aiming to be debt free in around two years 5
Annuity business with significant Free Cash Flow potential5
Buffered from disruptive technologies; supremacy amongst semi-urban and rural consumers
3
Poised to be the largest media company in India
5
Total Revenues (Rs Bn.)Year ending 31 March 2018
66.962.4
57.250.3
37.6
29.623.7 23.3 23.0
15.4 12.9
0
25
50
75
ZeeEntertainment
Enterprises
Dish TV India Ltd Tata Sky Network 18Media &
Investments
AirtelDigital TV
Sun TVNetwork
PVR D.B.Corp JagranPrakashan
HathwayCable &
Datacom
Den Networks
EBITDA (Rs Bn.)Year ending 31 March 2018
21.0 20.819.7 18.2
14.2
5.8 5.6 4.3 3.5 2.8 1.9
(4)
4
12
20
Sun TVNetwork
ZeeEntertainment
Enterprises
Dish TV India Ltd Tata Sky AirtelDigital TV
JagranPrakashan
D.B.Corp PVR HathwayCable &
Datacom
Den Networks Network18Media &
Investments
Source: Annual reports & company filings
Significant merger synergies to unfold
6
SAMPLE
TEXTSAMPLE
TEXT
~1100 mnCapexsynergies
~700 mnInterest cost synergies
Revenue synergies
Content & administrative cost synergies
Backend services & call centre synergies
~3300 mnabove EBITDA level synergies
5100 mnMerger
synergies
Already realised in 1H FY 19
Supremacy amongst semi-urban and rural consumers
7
Dish easiest to reach /
Most economical
for TV viewing
Distributed row houses
Growing penetration of wireless broadband
Unfeasible to lay fibre/
wired broadband
Negligible requirement
for unlimited
broadband
Larger family size
Inconvenient-Watching
linear TV on mobile screens
India outside big cities
Dish TV India has majority of its subscribers outside top-towns and cities
The Indian TV industry
9Source: TV industry size: FICCI-KPMG 2017; Households: BARC India Universe Update 2018; Distribution Industry: MPA Report 2017
AnalogCable28%
Digital Cable39%
Market share - Distribution Industry
DTH33%
2020 INR 821 Bn.TV subscription revenuesCAGR of 8%(2017-2020P)
TV Industry to gain from increasing TV and Pay -TV penetration
Broadcasting Industry
Multiple broadcasters, having 300 pay channels, 577 FTA channels, producing content in more than
15 languages
Total households (in Mn.)
Total TV households (in Mn.)
TV penetration (of total HH’s)
C&S Penetration (of TV HH’s)
2018 2020
298 311
197
66%
83%
220
71%
84%646
702
821
665
761
920
2017
2018
2020P
TV Industry Size (INR Bn.)
Subscription revenues Advertising revenues
20%
33%17%
14%
16%
TV viewing in India
10
95%98%97%
Percentage of single TV households
Source: Percentage of single TV households: BARC
77% large and affluent joint families have single TV’s, implying co-viewing as a consumption pattern
79% of Indian households still have CRT TV’s
All India Urban Rural
Daily tune in on TV:566 Mn. Individuals
Daily time spent per individual03:44:28
(hh:mm:ss)
TV continues to remain the most popular form of entertainment Share of TV viewership universe across age groups
Adults(31-40 yrs)
Kids(2-14 years)
Youth(15-30 years)
Senior(>50 years)
Popular across age groups despite rising internet penetration
11Source: Share of TV viewership by, and across age groups: BARC
0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000
51+ yrs
41-50 yrs
31-40 yrs
15-30 yrs
2-14 yrs
2017 2016
22%
Share of TV viewership universe by age groups(in Mn. impressions)
Contrary to popular perception, the youth contributes a massive 33% share of TV viewership, and has seen a growth of 22% in impressions over the year
Youth(15-30 years)
Mature41-50 years
Kids(2-14 years)
Senior(>50 years)
All India internet penetration- 30%
40.7
70.4
120
218
345
14.5 15.3 16.5 18.1 17.9
0
50
100
150
200
250
300
350
400
Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
Broadband subscribers (in Mn.)
Wireless broadband subs (mn) Fixed broadband subs (mn)
An overview of the Pay - TV Industry
TV households
197 Mn.
Pay -TV
163 Mn.
Cable Subs
109 Mn.
DTH Subs
54 Mn.
Non - Pay
34 Mn.
Free Dish
22 Mn.
13Source: TV & Pay – TV HH: BARC Universe Update 2018; Distribution by platform: MPA Report 2017; Free Dish subscriber base: MIB Annual Report, 2018
Asymmetry in the Pay - TV Industry
14Source: MPA Report 2017
Abysmally low content cost per subscriber per month in cable is an ARPU dampener for the entire Pay - TV industry
DTH maximized gains from Digitization (initiated in 2012). Majority of cable additions were conversion from Analog to Digital
Despite having only a 33% market share, DTH contributes >53% of subscription revenues earned by broadcasters
Cable DTH
Subscriber market share (%) 67% 33%
Content cost (INR Mn.) 50,938 56,982
Contribution towards subscription revenues of broadcasters 47% 53%
No deadline extension. TRAI Orders effective from February 1, 2019
Subscribers (in Mn.) 2011 2012 2013 2014 2015 2016 2017 2018
Net new additions by DTH 7.3 4.1 3.6 3.9 3.0 3.5 3.7 4.0
New digital additions by Cable 1.1 9.6 13.3 -1.5 9.7 13.5 10.2 6.9
Out of Which Analog seeding 0.0 7.6 11.5 0.0 8.2 12.1 9.0 5.8
Net new additions by Cable 1.1 2.0 1.9 -1.5 1.6 1.4 1.3 1.2
% of new additions by DTH 87% 67% 66% 100% 65% 72% 75% 78%
% of new additions by Cable 13% 33% 34% 0% 35% 28% 25% 22%
DTHCable
15
1,4391,131 1,064 997
103
DirecTV Charter Dish Comcast Netflix
Annual cost of Netflix 1/10th of Pay -TV cost in the US
Annual ARPU (USD) -2016
8054
3011 88 11 7 8 6
USA Australia Sweden Mexico Nigeria
Low cost of OTT vs Pay -TV drove adoption
Pay TV monthly ARPU OTT monthly fee
Source: Cost of OTT vs Pay –TV: Digital TV Research; Annual cost of Netflix : Marymaker Internet Trends Report 2017, : Cost of OTT vs Pay –TV: Digital TV Research & internal est.; Pricing of OTT services : Market Estimates
Emergence of OTT
The global OTT phenomenon
The India exception
600
180 210
Netflix Cable Pack DTH Basic packs
Pricing (per month) of OTT services vis-à-vis cable and DTH80
54
30
11 8 38 11 7 8 6 8
USA Australia Sweden Mexico Nigeria India
Cost of OTT vs Pay -TV per month (in USD) Pay TV monthly ARPU
OTT monthly fee
Low OTT costs compared to traditional Pay -TV platforms, led to higher adoption of OTT content globally
India is an exception to the global OTT phenomenon, with higher cost of OTT vs Pay -TV
16
IPTV as an offering
Reality check: Winning IPTV subscribers. Is it as easy as gaining telecom customers?
Telecom IPTV
Capex requirement Low Front loaded
Physical Infrastructure requirement Low High
Ground Task force Negligible Huge
Overall cost of delivery Low Extremely high per home
Distribution/reaching the last mile
Through local shops/ retail stores Through existing operators having access to homes
Pricing High existing data and voice costs supported aggressive undercutting by new entrant
Traditional C&S prices are too low to be susceptible to undercutting
Consumer experience/ novelty in offering as compared to existing service
Free voice and cheap data Nil ( Change in pipes only)
Potential reach of new technology Pan India Densely populated tier 1 cities
Potential consumers Data starved & aspiring mobile customers
Select consumers having extremely high data requirements
17
IPTV as an offering – An oversimplification of market thesis
IPTV as a threat to DTH – An oversimplification of market thesis! Have we seen this before?
• Mandatory digitization of Analog cable signals (Digital Addressable Systems), started in 2012, was perceived to be a threat to DTH
• DTH had the following advantages over Analog:
• DAS, on the other hand, had the potential to even out all these advantages as follows:
Value proposition DTH DAS
Video Quality Digital Digital
Number of channels High High
Pick and choose channels Available Available
HD channels Available Available
Value proposition DTH Analog
Video Quality Digital Analog
Number of channels Higher Lower
Pick and choose channels Available Not available
HD channels Available Not available
18
IPTV as an offering – An oversimplification .. (continued)
IPTV as a threat to DTH – An oversimplification of market thesis
• However, in reality, DTH emerged stronger than ever before post the event:
DTH Supremacy
19
Increased capacity & content throughput
VDSP Model
Consulting
eSolutionWeb Building
Web Design
Extremely efficient, low cost, video
delivery platform
Consumption of bandwidth
heavy content likely to
increase going forward.
SD HD UHD
Declining transponder
costs – an opportunity
Consolidation in cable &
implementation of the Tariff
Order to ensure a level playing field for DTH
Impact of changes in environment on DTH: mobility/fixed line
20
1.7
5.5
0.93
0.25
0.77
0.11
14.7%14.0%
11.4%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Siti Hathway Den
India broadband uptake as % home passed
Broadband Homes Passed Broadband Subscribers Uptake as (%) homes passed
8281,375
4,642
20,092
66.1%
237.6%
332.8%
0.0%
50.0%
100.0%
150.0%
200.0%
250.0%
300.0%
350.0%
0
5000
10000
15000
20000
25000
Dec -14 Dec -15 Dec -16 Dec -17
Wireless data usage and growth
Wireless data usage (in million GB per year) Growth (YoY In %)
Exponential growth in data consumption on mobile has restricted the need for data through fixed line
21
Impact of changes in environment on DTH: FTTH
Fibre not a game changer!
FTTH Value addition to consumer experience
High speed There are no specific applications which need 1Gbps connectivity and till these applications evolve customers would not necessarily jump onto the Very High Speed broadband.
Data volume Marginal utility of data is negligible
Bundling of data Virtual Data Service Providers or VDSP would be an equally effective substitute to services like FTTH which promise bundled data. Existing last mile service providers like DTH companies would become VDSP’s to offer data benefits to existing subscribers in partnership with their respective mobile service providers on revenue share basis. A win-win for both!
Exponential growth in data consumption on mobile has restricted the need for data through fixed line
Price FTTH also requires corresponding ONTs and Routers/ Wi-Fi devices at home, which add significantly to the costs. These costs cannot be justified if the applications used do not have a need to use 1000 Mbps. Thus price to the end consumer would never be lower than wireless data.
With ARPU’s at 3$ , the DTH industry is not ripe for price disruption. IPTV through FTTH would also not offer any incremental benefit to the consumer thus restricting scope for any disruption.
Global FTTH adoption trends show it has not been disruptive in any of the markets in US or EU, nor has it grown at extraordinary rates having run into a series of hurdles.
22
Impact of changes in environment on DTH: FTTH
Fibre not a game changer .. even when compared to existing fixed line broadband
Global FTTH adoption trends show it has not been disruptive in any of the markets in US or EU, nor has it grown at extraordinary rates having run into a series of hurdles.
3.48
3.19 3.14 3.102.89 2.85 2.79
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Jio Giga fiber 7 Star Digital Spectranet Airtel Atria convergencetechnology
You broadband Hathway
NETFLIX ISP LEADER BOARD - OCTOBER 2018
Current speed Mbps
Source: Netflix ISP speed Index, October 2018
Impact of changes in environment on DTH: new regulations
23
Consulting
eSolutionWeb Building
Web Design
New Tariff Regulations
Creation of a level playing field vis-a-vis
cable
Network Carriage Fees to provide revenue
stability
Transparency in content deals
End of irrational carriage fee revenues as carriage gets
restricted to niche channels.
Pass through of content costs to
de-risk the business
Overall margin expansion
6
5
4
3
2
1
Impact of changes in environment on DTH: new pipes
24
New pipes- IPTV
Subscriber reach
Unlike Pan India footprint of satellite,
IPTV would be restricted to densely
populated tier-1 cities
Last mile
Direct to home versus dependence
on last mile operator in case of
IPTV
Wireline broadband
Limited uptake due to easy
availability of broadband
through wireless
Only 16% of rural viewers have access to internet.
~99% of the rural internet users access internet through their mobile devices.
Dish TV India – The Road Ahead
26
Short Term
FY 2020 – Cricketing action!
• World Cup + IPL to aid growth in revenues and profitability
• In the past:
• Merger synergies and operating leverage would be at play
• Tariff Order to reduce content outgo
World Cup FY2011 (Mn) Growth YoY FY 2015 (Mn) Growth YoY
Net Additions 2.8 Up 95.8% YoY 1.5 Up 87.5% YoY
Revenues 15,246 Up 32.2% YoY 27,816 Up 10.9% YoY
EBITDA 3,269 Up 100.0% YoY 7,331 Up 17.5% YoY
Dish TV India – The Road Ahead
27
Medium Term
FY 2020-2021 – Well positioned to address evolving video needs
• Constant increase in content throughput and capacity; strengthening ability to compete
• Technological innovations to enable subscribers to watch content anywhere, anytime.
• VDSP – Partnering with telcos and broadband players to offer exciting benefits to consumers.
• Emerging as a stronger alternative to bundled offerings
Long Term
FY 2022 – Established and unrivalled
• Leveraging the 23.6 million plus subscribers for competing benefits
• Overall margin expansion
• Solid and regular free cash flows
Consolidation to lead to value creation
28
Dish TV-Videocon
37%
Tata Sky27%
Airtel24%
Sun Direct11%
Reliance1%
Market Share (% of net subscribers)
Source: Market share - TRAI Data, September 2018 [69.45-6 mn]
Higher market share of the combined entity to create synergies
A combined entity with a significant presence across
India
Value creation through synergies
29
Leveraging strengths of
each company
Cost and financial synergies
Revenue synergies
Adopting best practises
Identifying the strengths of each brand
30
High top of the mind brand recall
Value for money offerings
Deep penetration in tier 2 and beyond markets
High brand loyalty in trade circles
Premium segment offerings like 4K
Reasonable presence in urban markets
Popular in regional content markets
Tailor made packages for regional audiences
Presence in key vernacular markets like Orissa and West Bengal
Co-existence of all three brands to target a higher market share while maintaining healthy competition and synergy in backend operations
Adopting best practises- Customer service
31
1 million home visits every month by field service
Faster, Better and Efficient Service model built on a service infrastructure no other DTH player can match
Adoption of the company owned service model for the entire entity
More than 4,000 distributors and around 470,000 dealers Mobile App for subscribers
Call centres across India supported by a large no. of agents
Targeting more than 450 owned service centres and 5,500 company
technicians
Adopting best practises - Backend and IT Operations
32
IVR for faster response
Optimising AHT for better customer experience
Cross utilising critical infrastructure for synergies
Inbound/outbound swap
Synergising backend operations to reap long term benefits and faster turnaround time for customer resolutions
Reinvigorating the new entity
35
#JeetoSaareHeart
New leadership mix comprising of select professionals from both
entities
Separate sales teams with uniform structures
Fresh campaigns and branding initiatives. New Brand
Ambassador
Taking the lead in the industry with new customer centric packs-
‘Mera Apna Pack’
The beginning of the transformation into India’s most loved DTH brand!
#AlagHiView
Sharper customer focus with High Definition
36* Exclusive of taxes
Dish TV HD Add-Ons
English Movies & News HD – Rs. 101*
Hindi Entertainment HD - Rs. 133*
All Hindi HD - Rs. 197*
English Cricket HD - Rs. 57*
Tamil HD – Rs. 76*
Sharper than ever focus on boosting HD acquisition and recharges by maximising combined shelf and
retail visibility
Encouraging HD sampling through economical, must-
have HD bouquets
Quarterly performance metrics
38
Net subscriber additions of 142 thousand
EBITDA margin – 34.1%
Operating revenues
INR 15,174 million
EBITDA & EBITDA MarginINR 5,176 million
34.1%
ARPU
INR 200
93%
1%
2% 2%
2%
Subscription revenues
Lease rentals
Bandwidth charges
Advertisement income
Others
Consolidated revenues
37
.3%
16.2%
4.0%
8.4%
Programming and other costs
Other operating expenses(excl.prog. & other costs)
Employee benefit expenses
Other expenses (including S&Dexpenses)
Consolidated expenses
P&L structure – 3Q FY19
Quarter ended Quarter ended
INR Million Dec. 2018 Dec 2017
Operating revenues 15,174 16,143
Expenditure 9,999 11,165
EBITDA 5,176 4,978
EBITDA margin (%) 34.1 30.8
Other income 121 242
Depreciation 3,532 3,525
Finance cost 1,300 1,434
Profit / (Loss) before tax 464 261
Tax expense:
- Current Tax- Current Tax-prior years- Deferred Tax- Deferred Tax- prior years
18192
(1,281)(54)
101-
1,843-
Net Profit / (Loss) for the period 1,527 (1,683)
3QFY 2019 vs. 3QFY 2018Operating revenues break-up
(Rs. mn)
3QFY 2019
Summarized Consolidated P&L - Quarterly
14,126
189
324 300 236 Subscription revenues
Lease rentals
Bandwidth charges
Advertisement income
Teleport services, CPE &Other
39On March 22, 2018, Videocon D2h Limited had merged with and into Dish TV India Limited with the appointed date of the merger being October 1, 2017.
Annual performance metrics
40
Dish TV India Limited’s first set of merged financials for FY18
Combined subscriber base of 23 million
EBITDA margin – 28.4% #
Operating revenues*
INR 62,377
Adjusted EBITDA & Margin*INR 19,690
31.6%
ARPU
INR 201
91%
3%
3%
1% 2%
Subscription revenues
Bandwidth income
Advertising income
Lease rent
Other income
Consolidated revenues
36%
18%
5%
13%
Programming and other costs
Other operating expenses(excl.prog. & other costs)
Employee benefit expenses
Other expenses (including S&Dexpenses)
Consolidated expenses
P&L structure – FY18
* Presuming FY 18 financials represented 12 months each of Dish TV and d2h. * Adjusted EBITDA is EBITDA adjusted for merger expenses to the tune of Rs. 840 million booked in FY18 that have been excluded while calculating Adjusted EBITDA# Merged financials for FY18 basis 12 months of Dish TV and 6 months of d2h
Yearended
Yearended
INR Million Mar. – 2018 Mar. – 2017
Operating revenues 46,342 30,144
Expenditure 33,181 20,464
EBITDA 13,160 9,680
EBITDA margin (%) 28.4 32.1
Other income 542 615
Depreciation 10,717 6,908
Financial expenses 3,964 2,292
Profit / (Loss) before tax (979) 1,095
Current TaxCurrent Tax-prior periodDeferred Tax
53(30)
(166)
9820
(708)
Deferred Tax- prior period 13 -
Net Profit / (Loss) for the period (849) 821
FY 2018 vs. FY 2017Operating revenues break-up
(INR Mn.)
FY 2018
Summarized Consolidated P&L- Annual
42,167
1,225
1,375
670 905
Subscription revenues
Lease rentals
Bandwidth charges
Advertisement income
Teleport services, CPE &Other
41Financials of Dish TV India Limited for the year ended March 31, 2018 represent 12 months financial performance of Dish TV India Limited and 6 months financial performance of Videocon d2h Limited. Financial numbers for FY18 are thus not comparable with FY17. Presuming FY18 financials had represented 12 months each, operating revenues and EBITDA of the Company would have been Rs. 62,377 million and Rs. 19,690 million respectively.
INR Million Sept. 2018 (Unaudited)
Equity and liabilities
Equity
(a) Equity share capital 1,841
(b) Other equity 66,008
Equity attributable to owners of Holding Company 67,849
(c) Non-controlling interest (277)Liabilities(1) Non-current liabilities
(a) Financial liabilities
(i) Borrowings 20,139
(ii) Other financial liabilities 0
(b) Provisions 419
(c) Other non-current liabilities 557(2) Current liabilities
(a) Financial liabilities
(i) Borrowings 2,334
(ii) Trade payables 10,631
(iii) Other financial liabilities 12,370
(b) Other current liabilities 21,290(c) Provisions(d) Current tax liabilities (net)
30,058229
Total Equity & Liabilities 1,65,600
Consolidated Balance Sheet
42
INR Million Sept. 2018 (Unaudited)Assets(1) Non-current assets
(a) Property, plant & equipment 34,615(b) Capital work in progress 7,471(c) Goodwill 62,754(d) Other intangible assets 22,106(e) Financial assets
(i) Investments 1,500(ii) Loans 153(iii) Other financial assets 94
(f) Deferred tax assets (net) 6,080(g) Current tax assets (net) 1,111(h) Other non-current assets 2,210
(2) Current assets(a) Inventories 467(b) Financial assets
(i) Investments(ii) Trade receivables(iii) Cash and cash equivalents(iv) Bank balances other than (iii) above(v) Loans(vi) Other financial assets
(c) Other current assets
01,6011,0821,440
7315,080
7,762
Total assets 1,65,600
43