Dish TV’s Q3 FY17 net profit & revenues hit by demonetisation

Dish TV India has posted a consolidated net profit of Rs 266.80 million for the third quarter ended December 31, 2016, compared to Rs 684.90 million for Q3 FY16. Total income has decreased from Rs 7756.80 million for Q3 FY17 to Rs 7660.70 million in the same period of the previous fiscal. 

Consolidated subscription revenues for Q3 FY17 stood at Rs 6,921 million, up 3.3 per cent Y-o-Y, while operating revenues were up 2.4 per cent Y-o-Y at Rs 7,480 million. The DTH service provider added 204,000 net subscribers during this quarter, closing a net subscriber base of 15.3 million. 

EBITDA for the quarter was Rs 2,495 million, compared to Rs 2,654 million in the corresponding quarter of last fiscal. EBITDA margin stood at 33.4 per cent. 

Dish TV harmonised the accounting of entertainment tax in line with industry practice with effect from April 1, 2016. Earlier, entertainment tax was recorded as an operating expenditure, however effective April 1, 2016, it is netted-off against subscription revenues. Q3 FY16 figures have been regrouped accordingly for the sake of comparison. 

Year-on-Year revenue growth would have been higher considering service tax rate of 15 per cent in Q3 FY17 as against 14 per cent in the corresponding quarter last fiscal. 

The DTH industry in India has been one of the early adopters of the cashless and prepaid methods of revenue collection. The DTH company had close to 30 per cent of its subscribers paying it through various means of online recharges with the balance using the Electronic Payment Recharge System (EPRS). 

However, post the demonetisation announcement on November 8, 2016, 86 per cent of India’s currency got pulled out of circulation from the very next day, and recharges, where the medium of transaction was through EPRS, became weaker than initially expected. 

Jawahar Goel, CMD, Dish TV India, explained why. He said, “Limited cash supply made people defer their DTH recharges by a few days or weeks, depending on the urgency of other basic necessities. The impact was stronger in the second tier and below towns and cities as most of the economy in these areas runs on cash. Our subscription revenues during the quarter could have been higher by around 8 per cent in a non-adverse scenario. Lower growth eventually resulted in lower average revenues per user as well.” 

The fiscal third quarter being the period of festivals is generally the largest contributor to new subscriber additions during the year. Demonetisation, however, impacted Dish TV’s new subscriber additions also with the company recording an estimated 8-10 per cent lower subscriber addition during the quarter. 

Several steps were taken to keep consumers and dealers hooked on. “Subscribers as well as trade partners were extended temporary credit facilities basis their past transactions pattern. Subscriber awareness drives to promote alternate methods of payment were run both on the ground and on screen in addition to various other initiatives,” Goel said. 

Looking at the brighter side of it, demonetisation does promise an eventual less-cash dependent population that should use online payment interfaces over cash for DTH recharges. That’s going to be a boon for the DTH business. 

“Though demonetisation has led to an initial distress, it also will result in certain structural changes that are going to benefit the economy in the long run. As far as our business is concerned, the effect has already started coming in. As online payment transactions, credit cards and a less-cash society become buzz words today, we are happy to note an increase in our online transacting subscriber base from 30 per cent to around 38 per cent with around 22 digital wallets and the like being integrated with the company. Every online recharge transaction vis-à-vis EPRS based transaction implies savings on recharge commissions paid by us,” Goel added. 

Commenting on the results, he said, “We believe that the negative impact of demonetisation is only temporary and that with a strong subscriber growth rate, tight control on costs, reasonably steady free cash flows and a healthy balance sheet we should deliver sustainable growth. The rollout of the Goods and Services Tax (GST), a hopefully favourable license fee regime and a revenue conscious cable industry should only add to the strengths of Dish TV going forward.” 

The Ministry of Information and Broadcasting (MIB) announced on December 22, 2016, that it was pushing forward the mandatory digitisation Phase 3 date to January 31, 2017 and Phase 4 date to March 31, 2017. Dish TV on its part continued to seed set-top-boxes in both Phase 3 and 4 markets, the largest of the four digitisation phases, steadily during the quarter. 

Work continued on the Dish TV-Videocon d2h proposed merger as well with necessary applications being filed during the quarter with the Competition Commission of India (CCI) and the Stock Exchanges for obtaining their approval.


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