DTH players raise prices to pare losses
"The time has come to balance volumes and price points"
Hurt by forex losses and a rise in operating costs, India's leading direct-to-home (DTH) operators have decided to up prices of their channel packs and set-top boxes (STBs).
"The time has come for the industry to balance between volumes and price points. We were waiting for the rupee to appreciate but there are no signs of it yet. The cost of STBs has been affected by 17-18 per cent" says a Dish TV official.
Dish TV has from July increased the price of its channel packs by Rs 20 across the board while new consumers will have to cough out Rs 200 per STB. The base pack will now come at Rs 200 while STBs will cost Rs 1,790 from Rs 1,590 charged earlier. The last price revision in the base pack was in November 2011.
Tata Sky is in agreement with Dish TV's decision. "We will also match what others do in the marketplace. Prices had dropped by 30 per cent over the last one year and any increase is only going to be partial recovery of it at a time when the rupee has weakened against the dollar, softening from Rs 46 to Rs 56 against the US currency. It doesn't make business sense to add more subsidies and surmount our losses" Tata Sky MD Harit Nagpal told Indiantelevision.com.
Tata Sky had dropped its base pack price last year from Rs 240 to Rs 180 amid stiff competition from the other DTH operators.
Airtel digital TV is also expected to follow suit. The route Videocon would take is still unknown. Videocon d2h, which manufactures its STBs, plays the volume game and has the fastest growth in incremental subscribers.
Sun Direct, the Sun Group DTH company, will have less of competitive pressure to hike prices as the tendency (like Dish TV) is to leave the South India packs untouched. The south market is very price sensitive and Sun has based its rapid subscriber growth on low ARPUs.
The move by DTH operators comes at a time when the sector is facing slow volume growth compared to the last few years of explosive subscriber expansion. In 2011-12 the sector is estimated to have mopped up 9.5 million, down from 12 million in the previous year. Industry estimates peg the DTH sector to add up less than 9 million subscribers this fiscal.
Dish TV reported foreign exchange loss of Rs 510 million in 2011-12. In fact, the company had forex losses for the last three quarters of the previous fiscal. Dish TV will announce its first-quarter fiscal results on 19 July and the forex losses are expected to stay. The other DTH companies are not listed but all have suffered due to the softening of the Indian currency.
DTH companies who take a price increase run the risk of a higher churn rate. Dish TV has a churn rate of 1.1 per cent per month. "We will try to arrest the churn rate by adding more channels in the pack" says the official.
There may be a marginal rise in ARPUs (average revenue per user) as consumers will have to pay more for their packages. Market estimates expect the ARPUs to go up by Rs 3-4 per subscriber. Dish TV's ARPU for 2011-12 stood at Rs 152 (exit quarter ARPU in the fiscal was lower at Rs 151).
"The primary aim, however, is not to increase revenue but to lower costs" says Nagpal.