With more viewers likely to opt for the digital viewing experience, direct-to-home (DTH) service provider Dish TV looks set to gain.

A robust pace of subscriber additions, leadership in market share despite a competitive market and stabilising ARPUs (average revenue per user) are key positives for the company.

Dish TV has also been able to contain its content costs as well as expenses related to customer acquisition over the last three-four quarters. But the company is loss-making at the net level.

At Rs 66, the enterprise value to operating profit (EV/EBITDA) for the company is at 17 times, which is at a slight discount to peers such as Hathway Cable and Den Networks, despite Dish TV's larger scale and higher operating margins.

In the first nine months of FY12, while revenues grew by 43 per cent over the previous fiscal to Rs 1,433 crore, operating profits expanded by more than 138 per cent to Rs 354.2 crore. The losses at the net level too are narrowing over the past one year.

Dish TV has been able to increase its net subscriber base from 7.7 million in December 2010 to 9.5 million by end-2011. The company has also been able to garner a market share of nearly 26 per cent. This has been accomplished in a six player market that has entrenched operators.

The telecom regulator has mandated digitisation of all analog cables in the four metros by June this year. Another 37 cities' cable systems are to be digitised by March 2013.

A total of nearly 27 million potential customers would be created for players such as Dish TV.

The company has been able to maintain its ARPU at Rs 152 levels. In absolute terms this has increased from Rs 142 in December 2010.

The company has an ARPU of Rs 454 from HD (high-definition) services. With a large bouquet of channels (42) under HD, the company can hope to shore up overall ARPUs further once the market expands. With new movies increasingly being featured on DTH, realisations could be further augmented.

The company has also been able to keep its subscriber acquisition costs under control at around Rs 2,124, which is among the lowest in the industry.

Increase in interest costs due to higher debt and a depreciating rupee could hurt margins and delay its potential to turn profitable at the net level.

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