Competition gets intense in DTH space

The DTH segment is attracting newer entrants, with Bharti Airtel having launched its DTH on the Infosys convergence platform, and consumer electronics manufacturer Videocon preparing to launch its DTH operations.

Till a couple of months ago the only competition to the older established DTH operators in the country Tata Sky and Subhash Chandra-promoted Dish TV came from the unorganised sector-comprising cable TV operators.

In September, the Chennai-based Sun TV started its DTH dervices in the north and west, in a strategy to stabilise its operations region by region (See: Sun Direct introduces DTH in western, northern India),  shortly after Anil ambani's Big TV announced the roll out of its DTH services in August (See: Reliance BIG TV announces DTH roll-out )

With the entry of Reliance BIG TV's high-decibel entry backed by a Rs600-crore annual budget BIG TV competition has gained momentum and the company claims to have grabbed five lakh subscribers within two months of launch and is now targeting 5 million subscribers by 2008-09.
 
Against this, Tata Sky in two years of operations has acquired 2 million subscribers while Dish TV says it has 3 million. Both are aiming at 8 million subscribers by 2012.
 
While all the players have their strengths in being able to capture bigger chunks of the market Reliance Communications and Bharti Airtel stand out with their huge wired networks that can be used for telecast services as well.

Arun Kapoor, chief executive officer of Reliance Big TV says Reliance Communications has 50 million subscribers, five million Reliance Energy Ltd consumers, two million PCO partners who use ADAG's network and pay a bill every month.

Reliance BIG TV is looking at grabbing a 40-per cent share of monthly additions to the DTH market. The group has also announced plans to launch a broadcast network of about 20 channels through its entertainment arm, Reliance Big Entertainment Pvt. Ltd, which has interests in film production, distribution, FM radio, Internet and movie rentals.

Bigger rival Bharti Airtel has said it will launch its DTH services under the Airtel brand in the coming weeks. Its entry into the DTH also seems to be backed by a big ad budget going by its high profile ad campaign that has big names starring in the launch commercials. 

It plans to leverage its one million retail outlets that also offer mobile phone recharge coupons across the country. Airtel, whose billing system serves around 75 million customers, gives it an edge over stand-alone DTH operators,  Airtel executives say.

The other existing DTH players also have synergies with broadcast groups. For instanceTata Sky Ltd, a joint venture between the Tata Group and Rupert Murdoch's News Corp. has a telecom affiliate in Tata Teleservices while Dish TV India is part of the Essel Group, which also runs the Zee network.

Similarly, Sun Direct TV is a joint venture between Chennai-based broadcaster Sun TV Network Ltd and Malaysia's South Asia Entertainment Holdings Ltd. Videocon is the only one that does not have a network offering a service but may manage to gain from its in house manufacture of set top boxes.

High stakes
Revenue from television distribution is estimated to grow to Rs38,000 crore by 2012 and DTH is expected to have a sizeable share of it, says a PricewaterhouseCoopers report prepared for industry body Federation of Indian Chambers of Commerce and Industry.

So far BIG TV has grown more aggressively than others and managed to notch up 500,000 subscribers within two months of launch. The other players are also moving ahead aggressively in offering attractive deals. Tata Sky, for instance, is offering a new service which includes an advanced set-top box with a built-in recording feature and a hard drive capacity of 160 GB.

Considering that a three-hour movie is about 1.4GB, one should be able to store up to 800 half-hour programmes and about 115 movies in the box. Tata Sky's new hardware is priced at Rs 8,999 and the company is offering an exchange festive discount of 40 to 50 per cent to existing subscribers.

Other DTH players are also expected to launch their digital video recorders soon. Salil Kapoor, COO of Zee-promoted Dish TV, said, ''We have held on the launch of the DVR due to dollar fluctuation but we should be launching it in a month,'' he said.  Dish TV's recorder is expected to cost over Rs10,000 with memory to store 140 hours of content.

All the DTH operators are currently involved in extending their distribution, which would determine their revenues in the future. Airtel offers its service in 62 cities which will be ramped upto 252 cities later on. Aitel offers 175 channels through different packages priced between Rs2,500 to Rs3,999.

BIG TV is also moving ahead extremely aggressively in ramping up operations and plans to double its channel bouquet from 200 to 400 by next year, using MPEG4 technology platform, which enables doubling the number of channels in the same transponder capacity. It is also expected to launch 15-20 high definition (HD) channels.

The company has tied up with Thomson Headend Systems for a complete head-end system to boost its number of channels. To augment its growth plans, it had already booked four more transponders of the MEASAT satellite, which would take its total transponder capacity to 12.

Kapoor says his company is fully geared to add over 2.5 lakh subscribers every month with an on-ground infrastructure spanning 6,500 Indian towns.

Pricing services
Growing competition has led to price wars, much to trhe delight of the consumer. Reliance is already offering a package that includes installation charges of Rs1,400 with free subscription for three months for 150 channels, which it plans to increas to 400.

None of the DTH players are making money as startup costs are high and competition is eroding margins. In addition to this they are forced to advertise aggressively. According to industry figures, the industry will pay out around Rs1000 crore annually for advertisements and promotions.

So far, Tata Sky has invested Rs2,000 crore to acquire 20 lakh customers, and plans to invest a furhter Rs2,000 crore.

All the layers are providing a large number of channels, and investing heavily in the latest technology to provide interactivity. Airtel has a tie-up with Infosys for interactive technology and is offering a common remote for both the set-top box and television, while Dish TV has begun to provide a banking platform on television with ICICI Bank. Tata Sky offers religious and educational programmes to lure customers. BIG TV is also coming up with interactive cricket and interactive news within two months and is in talks with a leading sports broadcaster for this.

Shubham Majumder of Macquarie Research is bullish on the DTH space and believes that it will grow at a CAGR of 60-70 per cent for two-three years. He said that the DTH space could mimic the growth of telecom in India.

Manoj Kohli, chief executive officer and joint managing director of Bharti Airtel, puts it in a nutshell when he says that India has 225 million households and DTH penetration is barely 3 per cent of that. There seems to be enough room for everyone to grow.