Jul 26, 2013, 05.23 PM IST | Source: CNBC-TV18

Content, marketing cost impacted margins in Q1: Dish TV

In an interview to CNBC-TV18, Jawahar Goel, MD of Dish TV says that the company's margins were impacted due to higher marketing costs and content costs.

The free cash flows will help us to pay up the loan and reduce the interest cost.

Jawahar Goel

MD

Dish TV

Jawahar Goel, managing director of Dish TV believes that the company will manage to be debt free by the end of next year. He is confident of better margins for the company, going forward.

Increased content cost by 32 percent of the subscription revenue due to a deal with a broadcasters, and rising marketing costs of Rs 32 crore have led to fall in EBITDA levels, Goel told CNBC-TV18. Topline, free cash flows and average revenue per user (ARPU) have witnessed a health trajectory in this quarter. Going forward, this health cash flow will help in paring down the debt of Rs 750 crore during the year, he says. The costs will be tapered down in the coming quarters, which will reflect on the margins, he adds.

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Below is the edited transcript of his interview to CNBC-TV18.

Q: Your EBITDA seem to have disappointed the street where the margins have come in at 20.7 percent this quarter. Can you just take us through what sort of cost pressures actually face the company this time around and what is your guidance on the margins going forward?

A: There are three factors. One, is foreign exchange. Two, is the content cost because this is the first quarter we had negotiated the deal with one of the broadcaster. That is why our content cost has gone up by 32 percent of our subscription revenue. Third, there is higher marketing cost. We spent around Rs 32 crore in this quarter on marketing, brand building exercise so, these are impacting.

Otherwise our top-line, average revenue per user (ARPU) has been healthy. One of the parameter that I look which is a strong parameter for my company is free cash flow (FCF).

For the last whole financial year, our FCF was Rs 64 crore; this quarter is Rs 48 crore. We are planning to retire our loan by Rs 750 crore this financial year and the FCF will help us to pay up the loan and reduce the interest cost.

Q: Could you tell us whether these increased programming cost and the content cost will continue to remain elevated in the next couple of quarters; thereby causing your margins to remain in this 20-22 percent mark?

A: The contract was expired, which was signed 2-3 years back. So, we had signed on upside. In the future quarter’s our revenues will grow, content cost will be flat. So our margin will improve over the quarters.

It has always been the scene when we sign the contract, our content costs get high and then it tapers down. That is the way we do business. The margins will improve in coming quarters because the content cost will remain flat.

Q: The heartening part this time around is that your finance cost have fallen on a year on year basis. Can you just talk about your debt reduction plans? We have been told that you would like to pare off Rs 150 crore of debt. What is it currently standing at? What are the measures you would use to pare it down?

A: We have cash as well as from internal accrual, FCF is positive. This financial year we will retire around Rs 750 crore and next year we will make the company debt free.

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