Digitisation good news for MSOs but taxes worry: Dish TV

As the deadline for the digitisation of the cable-TV industry nears, CNBC-TV18 spoke to Jawahar Goel, managing director, Dish TV about the various aspects of the digitisation process.

Goel dispels fears about any considerable extension of the deadline and explains that the cable-TV industry was still troubled by multiple taxes. He says that the government had to consider aiding the industry rather than abolishing carriage fees which was a venue to raise capital.
He points out that an element of mistrust among MSOs, distributors and LCOs prevalent in cities such as Delhi, Mumbai and Chennai was slowing down the process of digitisation. Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: First up what’s the expectation on the rules being effective? Do you think the June 30 deadline will be met? There are many on the street who expect a three-month delay. Do you think it could stretch upto six months?
A: The government of India has so far made it clear that the deadline would be met. In the first phase there was the requirement of a six-month clearing period for the company to work out the feasibility.
And if the regulation and the tariff orders have come just day before yesterday, there is a case for extension. The extension maybe only for two or three weeks at most. Q: How do you expect it will impact multi-system operators (MSOs)?
A: It is good news for MSOs. But the factor that will impair the whole digitalisation process are the multiple taxes. So, I know the government was opposed to carriage fees, but the carriage fee was one of the tools MSOs used to raise capital.
But if the government wants to help MSOs and the cable industry, it could discuss the early implementation of GST, service taxes and entertainment tax issues. Q: So the government should not oppose carriage fees at all?
A: I am not saying that. The government has the right to oppose the carriage fees, but they should also help the cable industry. Q: Where does this leave you as a DTH company?
A: For DTH companies, it will be a level-playing field. For a DTH company, the input cost, as far as pay channel revenues are concerned, is as high as 30-40% with a tax burden at 30%-35%. Q: As the deadline approaches, do you think consumers will be forced out of the analog cable inertia? Do you could see a pick up in conversions as the deadline approaches or has a large chunk already been already converted?
A: The market is having traction with the consumer demand for set-top boxes and the relationship between MSOs, distributors and the local cable operators (LCO) in some part of the country is very good like in Kolkata.
So there a lot more set-top boxes being sold. But in Mumbai, Delhi and Chennai, there is mistrust amongst the MSOs, the distributors and LCO. So, the things are not moving as planned. Q: With conversion from analog to digital increasing, the ARPU (average revenue per user) could be as high as at least a minimum of Rs 200. Do you think there is a scope for DTH operators to then implement hikes once the digital form of cable comes in?
A: The DTH sector has been at a disadvantage in terms of ARPU, cost and taxation. So, some level-playing field will come in and the consumption pattern will depend on it. If the customer consumes more content they have to pay more and that gives headroom to the DTH industry as well. Q: On the ARPU front, there is an expectation that as there are conversions from analog to digital, the ARPUs could be as high as at least a minimum of Rs 200. Do you think there is a scope for DTH operators to then take hikes once the digital form of cable comes in?
A: DTH has been at a disadvantage on the ARPU side, on the cost side as well and taxation side. So, some level-playing field will come and the consumption pattern of the consumer that will all depend on it.
If customers consumes more content obviously they have to pay more and it gives the headroom to the DTH industry as well. Q: Any guess on when you might be able to break-even then?
A: I would not like to comment on the results.