Impact of phase II not yet priced in on delays: Dish TV

In an interview to CNBC-TV18, Jawahar Goel, MD of Dish TV explains his company's rationale for increasing prices and the road ahead. 

Below is an edited transcript of the interview on CNBC-TV18.

Q: Can you take us through the decision to hike prices and by how much it may bolster your average revenue per user (ARPU) from here?

A: It is not the price hike on account of our services. We had passed down part of the service tax burden to the customers. So we had increased by 10 percent whereas the service tax on this industry is 12.3 percent. We had taken that decision across-the-board.

Q: With this price hike any direct impact on your bottom-line?

A: We are just 48 hours since we rolled out. We have the subscriber which had paid for 2-3-4 months. So the price protection is given to the subscriber who has already paid for certain duration of services. This will pan out and the impact will come gradually.

Q: You have also hiked the set top box prices. Net-net with the subscription pack and the set top box increases do you think next quarter onwards your margins will be better?

A: We have not increased the price. It is the government who has increased the custom duty on it and the dollar variation. So we were forced to reduce our subsidy on the set top box and this is the right term we should use. I believe the price increase on the set top box will require less capital and that is why the company has decided to postpone in a medium-term the fundraising plan of Rs 200 million, the resolution which we had obtained from our shareholders and the Foreign Investment Promotion Board (FIPB). So these are the positive developments for the company which we are sitting on right now.

Q: How is digitisation working out for Dish TV? You have completed two phases as of last month. In terms of subscriptions what have you seen as an impact?

A: Digitisation is happening in 38 cities; around 8 or 9 cities are close to 100 percent. Some cities are below 50 percent, so overall impact is yet to be seen. There is the Chief Minister and some court cases in Karnataka, Andhra and some are in Gujarat. So there had been some stray delays because of the court cases and I understand the Indian Broadcasting Foundation (IBF) has decided to intervene and bring all such cases into the Supreme Court.

The digitalisation is taking place, but one thing I would like to disclose here that in states like Uttar Pradesh, Madhya Pradesh and Maharashtra the cable will be expensive than any DTH you can take, just because of the entertainment tax.

In Uttar Pradesh, the entertainment tax is 25 percent gross. It works out to be 32-33 percent of the subscription which a subscriber pays. The same way in Madhya Pradesh it is 20 percent and that too on gross basis. So the entertainment tax on cable, there the DTH will be cheaper than the cable subscription.

Q: Given the rollout by the end of this calendar year what kind of subscriber addition do you think you could get to?

A: The subscriber addition is always cyclical. We have a cricket match now, so whole of night our register was tickling. It is cyclical, event based. When our subscriber increases, the renewal increases, the churn reduces. When there is the dull period the churn increases, the sales come down. That the Phase II digitalisation is a good chance for the DTH companies to have the market share, but at the same time this will carry on and ultimately the DTH and digital cable will settle at 50-50 percent on all India market share basis.