Dish TV Managing Director Jawahar Goel says the journey has been difficult for the DTH player in the country. He, however, is confident that the company is “almost home” and would soon turn profitable.

He spoke to The Hindu about the industry and the company. Excerpts:

How has the journey been for you and how has the industry evolved?

We are as old as this industry in India. When we applied for DTH licences, the regulations were not very clear. Then, we had to struggle for the content. Star did not give us content nor did Sony. ESPN asked for a huge amount. Besides, satellite capacity was also limited. There were only four transponders. So, we started services with only 48 channels. And, with 48 channels, we could not have gone all out in the market. So, we devised a strategy, dividing the market into three categories — cable dry, cable frustrated and cable rich. We went in the cable dry market i.e. we started with rural where there were no cable services.

Thereafter, we migrated to a foreign satellite which gave us more capacity. It took us about two-and-a-half-years to sort out content deals as regulations had not yet matured and mostly the regulations were based on the rulings of TDSAT.

Then, every year we had a new competitor emerging. And, these were big competitors with big pockets such as Tata, Reliance, Star, Sun TV and Airtel.

From 100 per cent share in the industry, we are today at about 28 per cent as the market has grown and competition has increased. So the journey for us has been difficult. This industry is one-third of the total cable pie. The total industry revenue was about $2 billion as of last year. Investments by the industry till now have been around $5 billion, and the investment on an annual basis continues to be of about half a billion dollars.

What are the major issues being faced by the industry?

DTH industry suffers from double taxation. We are the only industry where service tax is also there and entertainment tax is also applied. In other sectors, such as multiplexes, only entertainment tax is there. Taxation and licence fee are almost 40 per cent of a DTH operators’ revenue.

So, your demand is for removal of service tax?

We have requested to allow abatement in service tax to the extent of entertainment tax paid or 60 per cent of service tax - whichever is lower. In such a scenario, it will also be smoother transition to GST regime when it is implemented. We will wait for the Budget to see what happens.

Last month, we had a combined meeting of all the stakeholders where it was decided to give joint representation on the tax issue to the government, besides other issues.

Also, the DTH category consists of six operators. They contribute 50 per cent of the pay revenue to the broadcasters. Then there are eight MSOs, who contribute 30 per cent. But, these eight MSO get similar or more amount of carriage fee than the DTH operators. DTH operators pay more as content costs. Our content cost for each subscriber is about Rs 70-90, depending on the platform, whereas for the top most MSO’s content cost will be almost nothing. For us, content cost is about 30-35 per cent of revenues.

So, if 40 per cent is tax and 35 per cent is content, I am left with 25 per cent to subsidise the box, pay for satellite, marketing, distributor and return to shareholder.

The recent announcement of classifying set-top boxes as telecom equipment was welcomed by the industry. What is your take on that?

This discussion was between the hardware manufacturer and the government. But the people who are going to invest in the set top boxes such as MSOs were never consulted.

So this was the requirement of the hardware manufacturers to resolve tax anomaly. This might help, but at the same time we are talking about the vendor (hardware manufacturer) who is not a part of the I&B Ministry. MSO, DTH broadcaster and LCO are constituents of the I&B ministry, hardware category is the outside agency.

So, this move will not help MSO or DTH provider?

It’s a chicken and egg story. In electronics if a set-top box manufacturer is buying components in millions as he is operating for the global market, component price comes in a different price bracket. Whereas production for Indian market is concerned, the only Indian manufacturer doing it is Videocon who manufacturers for own consumption. Other players have been trying to develop a reasonable pricing mechanism but have not been able to do so in the last 13-14 years. They are still lobbying and hoping there can be anti-dumping on the imports. But then we also have bilateral relations to consider. So we need to see how the present government takes things forward under ‘Make in India’ campaign.

So, would you look at setting up manufacturing unit?

Yes, we are also studying and re-looking at building production capability domestically. At the same time, we need to see the tax regime. If it becomes adverse for imports, then we will definitely build the capacity, and in 3-4 months time, we will have domestic capacity.

Can you give an idea of set-top box prices, and how much is your customer acquisition cost?

For standard definition, the price of boxes both for cable and DTH is between $12-18. In high definition, it is somewhere around $19-24. When we started our business, we were buying standard definition boxes at $52. So, from that point, it has come down by one-third.

We have a subscriber acquisition cost of about Rs.2,000. We invest in terms of taxes, installation etc. So, we take a hit of Rs. 2,000 when we acquire a subscriber.

We get to recover in two-to-three years' time if the subscriber stays with us. If boxes are just lying around, they are just environmental hazards.

When do you see the company turning positive?

We are almost home. Let us wait for this quarter, and see how it shapes up.

>yuthika.b@thehindu.co.in

(This article first appeared in The Hindu dated December 15, 2014)

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