Margins to improve 250-300 bps this year: Dish TV

"There is a potential margin improvement due to GST and the new licence fee regime which is likely to come, but 250-300 basis points over the next 12-18 months without any external stimuli is certainly feasible," he said. 

He expects the company's subscriber base to increase by 1.4 to 1.7 million thsi year. 

Below is the transcript of RC Venkateish’s interview with CNBC-TV18’s Sonia Shenoy and Anuj Singhal.

Sonia: You have turned into the black this quarter and for the fiscal. Give us an indication of what led to this performance and whether you can continue to see a profit in first half of FY16?

A: Various elements of our strategy are falling into place as far as the subscriber additions are concerned. The momentum picked up quite dramatically in FY15.

The second brand that we launched, Zing, in phase 3 and phase 4 areas is doing exceedingly well; exceeding all our expectations. Simultaneously, we had a strong pickup in our high definition customers as well. Both these products are margin accretive. Zing because the content cost is low and therefore, it leads to higher EBITDA margins and HD as it is has high EBITDA margins. So, that’s what sort of helped us expand the margins quite substantially.

Anuj: This is the first annual profit that you have reported since your listing and a lot of investors were waiting for that. Can you say with a fair degree of conviction that from hereon you are going to remain in black and you are going to report a healthy compounded annual growth rate in terms of profit?

A: If you look at the way our numbers have been progressing and the delivery this quarter, I think that would be a fairly reasonable expectation.

Anuj: What kind of market share do you have right now? Are you still the market leader ahead of Tata Sky?

A: In FY15, we regained our market share leadership; in FY14, we had slipped. For FY15, we have incremental share of around 27.5 percent.

Sonia: You did mention that there has been a very healthy subscription revenue growth. In fact, this quarter you have seen a growth of around 25 percent odd. In your press release, you have mentioned that now your subscribers stand at close to 13 million at the end of this year. On this base, how much can your subscribers grow to by the end of FY16?

A: We had last year guided for 1.2 to 1.5 net adds. We came in at the top end of the range. This year, we will be guiding for slightly higher numbers around 1.4 to 1.7 million net adds.

Sonia: What about average revenue per unit (ARPU)? The good part is that this quarter your ARPUs have also grown to about 179 versus 177 for prior quarter despite the impact of two lesser days in Q4. Will you maintain or will you sustain this up move in your ARPUs?

A: Absolutely, in fact two days account for 2.3 percent so effectively on a like to like comparison the ARPU would be closer to 183 rather than 179.

We have taken several steps to push up the ARPU including introduction of differential pricing which has gone down quite well. It has been well absorbed in the market. So, we believe there is more headroom to grow on that.

What has really happened is that the cable system is also moving prices up and therefore the overall DTH industry should be able to see a sustainable ARPU growth over the next two to three years at least.

Anuj: Are you saying that company still has some more pricing power because we have seen rates go up over the last one year?

A: Absolutely because the actual total price paid by the consumers in relationship to the quantum of service that they are getting is still pretty low. It has been held back because of the local cable operator (LCO) system. Now that the power of the LCOs, because of digitisation and in terms of pricing at the last mile, is reducing; the organised digital system is, in cable or DTH, increasingly getting the pricing powers. So, we can expect fairly sustainable ARPU increases over the next 2-4 years.

Anuj: What about your ad spends? What kind of ad spends will you have to incur over the next one or two years?

A: If you look at the total sales and marketing spends; marketing is around 3 percent and sales is around 3 percent of topline is what we believe is more than adequate to sustain these levels of growth.

Anuj: Just to get a sense of what all of this will do to your margins. You have completed the year with quite healthy margins of almost 30 percent. How much could the margins grow to in the first half of the fiscal?

A: Without help from the external environment there is a potential margin improvement due to GST and the new licence fee regime which is likely to come. Between those two, there is about 350-400 basis points. Organically, I think at least another 250-300 basis points over the next 12-18 months without any external stimuli is certainly something which is feasible.

There is a potential margin improvement due to GST and the new licence fee regime, but organically, at least another 250-300 basis points over the next 12-18 months without any external stimuli is certainly something which is feasible.