Dish TV India Ltd
NSE:DISHTV
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Dish TV India Ltd
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Thank you, Raymond. Good evening, ladies and gentlemen. Thank you for joining us today for the First Quarter FY '20 Earnings Conference Call of Dish TV India Limited. Our sincere apologies, we had to delay this call, because we were stuck with a technical glitch that was not in our hands. We were hence not able to upload the results. And as soon as we were able to do that, we decided to quickly come on this call. Although we have got very limited time to go through the results, but we are hoping that we should be able to answer your queries now or even post this call, if there is a need. To discuss the results and performance, joining me today is Mr. Jawahar Goel, Chairman and Managing Director of the company, Dish TV India Limited; along with the senior management team, that is Mr. Anil Dua, Group CFO, and Mr. -- Group CEO; and Mr. Rajeev Dalmia, the CFO.We will start with a brief statement from Mr. Dua, and we'll then open the discussion for questions and answers. I would like to remind everybody that anything that we say during this call that refers to our outlook for the future is a forward-looking statement that must be taken in the context of the risks that we face.I would now request Mr. Dua to address the participants.
Good evening, ladies and gentlemen, and thank you for joining us today for the first quarter fiscal 2020 earnings conference call. The results and the earning release both have been uploaded on the company's website.Building on the foundation set by the last month of the previous fiscal, the company continued to add subscribers throughout the first quarter. Net additions for the quarter stood at 209,000, with more than half of them being high definition. With the television industry finding its feet, the new regulatory regime seems to have finally stabilized. The tariff order has led to the beginning of a new era with trending costs coming up as through expense.Apart from the accounting significance, the move indicates a massive shift from the traditional [Technical Difficulty]
I'm sorry to interrupt. This is the operator, but we can't hear you very clearly. You are reconnected to the call, sir. You may go ahead.
Okay. Considering that the new regime emphasizes the role of a la carte, content would be subject to subscribers' filtration. As a distributor, we would only be procuring content that sells, while adding value through our packaging, quality of our service and our new products.Fiscal 2020 is going to be the first full year of the tariff order implementation and should witness its positive impact as well. We strongly believe that the new regulatory regime will enable large distribution players like us, Dish TV, to emerge stronger than ever before.The first quarter fiscal 2020 consolidated subscription and operating revenues stood at INR 8,261 million and INR 9,263 million, respectively. EBITDA for the quarter stood at INR 5,360 million. In line with expectations, subscription revenues were strengthened due to an engrossing cricket season. The general elections too had TV viewership going up significantly, which ultimately positively impacted the subscriber additions and revenues.The company achieved an EBITDA margin of 57.9% under the new tariff regime. Watcho, the in-house OTT app of Dish TV India should continue to strengthen its presence in the OTT space, thus becoming an effective retention and value addition tool for us. Having jump-started the year, we find ourselves all set to leverage the possibility of multiple growth opportunities that lie ahead. In the near term, operating efficiencies resulting from further realization of synergies due to the combination of Dish TV and D2H should continue to positively contribute to the business and financial performance of the company. With that, I would like to open the floor for the Q&A session.
[Operator Instructions] The first question is from the line of Vivekanand Subbaraman from AMBIT Capital.
So I have 2 questions. One with respect to consumer behavior after the implementation, do you think consumers are exercising their choice, and they are choosing a la carte packages? Or you -- the packages that you have suggested, they are more popular? And could you give some color on how much are consumers paying now after the regime versus what they were paying to you earlier?Second question pertains to some financial issues, like the outstanding that you had payable to Zee and recently, there are media reports where Star has filed a case against you for receivables pertaining to content. Where does that stand? And another accounting or rather financials related question is, how does the license fee computation happen now?
Yes. Vivekanand, thanks. So last quarter, we had discussed that consumers were in a state of transition, trying to understand how to create their new packaging. We were offer them -- we were offering them all the opportunities. In fact, we were the first one to start and give all options on various channels to create their own packaging. Customers lapped it up, we gave them a lot of choice that also led to a certain amount of time taken by the customer to settle down with new packs. But I'm happy to report that, that process is behind us, and the whole process has settled down. And consumers are now watching the packs that they want to watch. It's a combination of a la carte channels that we've chosen, the DPO packs that we have provided and, of course, also the broadcaster bouquets, which are part of those packs.So that's on the first one that customers are taking a combination of various things to their liking, to their choice, to their price point. As a part of the question, you had also asked how much they are paying now versus earlier. So as we had said in the past that there are customers, a little less than half, who have gone for a price point lower than what it was earlier and a little more than half have gone for a price point which was higher than earlier. But the good thing is that with cricket and election season and other things during the quarter, they've also added on channels on top of that. We have to now see as we go forward how to build upon this.
Yes, As far as licenses fees is concerned, now that will be on the basis of INR 926 crores rather than the earlier regime where it was including the content cost. So it will go down to the extent of the content cost. To give you an example like we paid the INR 2,000 crores last year. So this year, license fee will be less by INR 200 crores. Now coming back to the payment or amount payable to Zee and Star, there were certain issues in terms of how the billing will be done and how the incentive will be allocated to us. Because of this, there were some delays in payment to both the broadcasters. But now things are more or less settled and we have started paying to both of them, and it will cleared by the month of September, all the outstanding dues. And we will be starting fresh from 1st of October.
The next question is from the line of [ Abhishek Srivastav ] from Jhaveri Securities.
Sir, just wanted to understand what would be the consumer level ARPU under the new regime?
ARPU is 116 based on the new accounting that we have done. But the consumer level will be around say [ 270, 75 ]. But it varies on a month-on-month basis, because things are still not completely settled at base of the consumer. So it varies because the price of channel, we recently concluded the World Cup, then we had IPL. So there are lot of fluctuations. But we hope that in the second half of this year, we will get a flavor that what is going to be the run rate as far as the consumer ARPU is concerned.
Okay. And this is net of taxes, right?
Yes. It is net of taxes.
And going forward, what do you see -- it will be going up or it will go down?
So that's exactly what we're seeing as a steady state, if I remove the effects of cricket, we definitely see it going up. But in -- because of cricket, customers come and go, and they add packages, they remove packages. So the steady state figure will emerge. This is the first quarter with the new accounting, and first time we are talking of a figure like 116. I think we'll have to wait and watch. But fundamentally, the way we have planned things and the way we see things during the first quarter, the underlying growth in ARPU should be there.
Okay. Just one more question. Compared to cable, is it higher or lower? Or is it at par with the cable ARPU?
The good thing is that this NTO, new tariff order has created a level playing field between cable and us. So earlier cable prices used to be lower than us. Now cable prices are pretty similar to our prices.
The next question is from the line of Rohit Dokania from IDFC Securities.
I just had 2 questions. One is continuing on the ARPU bit, if you can give us a comparable number, sequentially? So if I calculate your Q4 ARPU under the sort of erstwhile norms, it was about 185, 186. What would that number be comparable for this quarter?
So it is 199, 200.
Okay. That's helpful, sir. The other question that I had is, if I look at your sort of -- under the old regime, in terms of the Note 4 of the results. I see sequentially, your expenses were actually sort of grown by almost like 7-odd percent. So from about overall expenses, I'm talking about from 983-odd, it's up to 1,052. So is it because it's a cricket heavy season, we have had to sort of give more sort of content as well, and that's the reason why expenses have increased? That's one. Secondly, if I adjust for this -- the again, Note 4 in both revenue and sort of operating expense, then the EBITDA under the earlier regime appears to be 476. Is that the correct calculation?
Yes. Now it is 536 and it was 476. And if you compare the expenses with the fourth quarter, definitely first quarter was higher because of selling commission, service payout and overall marketing costs, because the number of subscribers added were quite higher -- quite high as compared to the fourth quarter. But if I go line-by-line, then we have based on general administration, we have based on collection cost. And we have also based on the [ partner ] costs, because [ partner ] used to be INR 55 crores to INR 70 crores per quarter, which has gone down to INR 45 crores. And we further see some INR 1 crores or INR 2 crores going forward saving on account of personnel costs. So overall line-by-line, it has gone down. But of course, because the selling and service is linked to the number of new installations, that has gone up in the first quarter.
Okay. And any comment on content cost, particularly because of this being a cricket heavy sort of quarter?
Content cost, now the scenario is more is the content cost, more is the revenue, because we get 35% of what we bill to the consumer. So content according to our estimate was around INR 610 crores.
Okay, fair enough. Sir, last question, can you talk about your sort of gross and net debt at the end of this quarter?
Yes. Gross debt is INR 2,150 crores and net debt is INR 1,900 crores.
The next question is from the line of Himanshu Shah from Gaja Capital.
So just couple of questions. What is driving this decline in employee costs?
Declining, sorry?
Employee costs?
Employee costs.
Because there was some rightsizing done in the last quarter, and the benefit of which is coming into this quarter. And it will continue. And there were some changes in the model of service, which led to saving of cost because of less employee required under the new regime. And as we guided during the last year about the synergy benefits. So this is one of the item in which we work quite hard. And this year, the difference between the last year and this year will be around [ 92 ] [indiscernible].
Okay, sir. Second thing, sir, can you help, what would be the cash benefit on the license fees...
Sorry to interrupt you, Mr. Shah, but we can't hear you very clearly. [Technical Difficulty]
Yes. You are able to hear me now?
Yes, better.
Yes. It will be around INR 200 crores this year, minimum versus the last year average. And if we are able to generate more revenue, it will be relatively higher.
Sir, this will be with cash savings? Or at P&L level? Because I think, sir, payouts...
If will be definitely at the P&L level, but some of it will flow in the cash also, because when we derive the number after adjustment, based off the [indiscernible] adjustment, the number will be around INR 175 crores lesser than the last year. This is the current accounting pattern.
Okay. And sir, what would have been the -- any churn for this quarter, churn percentage or churn ratio?
It was 0.9%, sir.
0.9%. And sir, can you help with the revenue breakup, besides the subscription revenue that we have called out?
So system revenue was INR [ 1,826 ] crores, carriage, INR 43 crores [indiscernible] and INR 20 crores, Other operating income INR 23 crores, and total is INR 926 crores .
Okay. And sir, just lastly. Can you help, how do we plan to bring down the pledge that is there because probably from whatever we are gathering from the media, these state filled may not be sufficient to pay off the entire group level debt in the corporate books of there. So how do we plan to bring down the pledge?
Himanshu, I will not be able to comment on this because this is not part of the operating team. And maybe at the opportune time, we will jump back on this as this is a very [indiscernible] in which it is difficult to...
Fair enough, sir. No issues. That's it from my side.
The next question is from the line of Sanjay Chawla from JM Financial.
Just wanted to confirm if I picked up these numbers correctly. The ARPU, comparable ARPU this quarter was INR 199 to INR 200, and the comparable programming cost, content cost was INR 610 crores. Can you confirm that?
Yes, yes. Correct.
Okay. And also, just a second question. Can you indicate the -- in terms of the consumer profile, how many customers, what percentage would have taken the a la carte vis-à-vis the TPO bouquet that you have offered, broadly?
These are still evolving. We are just 2, 3 months old. Maybe after second quarter, if you ask this question, there will be some kind of certainty. Because it was heavily affected by the World Cup and IPL. So it was quite a mix of many events.
So because of this cricket events, you think the a la carte percentage would have been higher than where it eventually...
But now they are again gone, maybe they will come back because the West Indies series are going on from 3rd of next month, so there will be again a rush of employees -- a rush of subscribers for cricket.
Okay. And in terms of the customer additions for the year, we are -- what level are we expecting? Because I believe you gave a number of 1.4 million last quarter. Are we sticking to that? Or you think we would want to update it?
So the 1.4 million is an internal thing. We have said last time that we'll be sharing our guidance only at the end of the first quarter. So our guidance is in the direction of about 8 lakh for the year in terms of net adds.
[Operator Instructions] The next question is from the line of Jay Doshi from Kotak Securities.
Could you please disclose the license fee provisioning for the current quarter and the base quarter, on the P&L, provisioning of license fee?
See, license fee will be around INR 55 crores.
In this quarter?
Yes. And -- okay. And this is because of the trend in the accounting. Overall, we will be saving INR 175 crores this year because of the new top line as compared to the last year.
Right. No, but last year, base quarter provisioning would be much higher, right, more than INR 100 crores, I would assume, on the P&L?
It was INR 150 crores...
INR 106 crores.
INR 106 crores, yes, because of the different, INR 106 crores, yes.
Understood. So on the cost, when I look at your other expenses of direct operating costs, the base quarter would have INR 106 crores of license fee and the current quarter would have INR 55 crores. There is a delta of INR 60 crores from an EBITDA standpoint. And in terms of payout, sir, is -- did I hear you correctly, that INR 2,000 crores was a payout for FY '19 full year. Like-to-like on a similar -- everything else being same, you would probably save about 7%, 8% over there.
Right. Right.
Correct. And -- understood. That is helpful. Sir, still -- so there won't be a significant gap between what you provide and what you pay out in the current year?
Yes. That content cost which was announced is a pass-through item.
Correct. Correct.
Accounting pass-through top-line. So there will be less confusion going forward.
Correct. But even now, sir, your provisioning is 6% of revenues. So what are the -- as against maybe 10% on adjusted. So what are the adjustments that you can still do now that content cost is pass-through...
Balance is due to Dish Infra. The 4% leverage is part of the revenue generated in Dish Infra, which is not subject to license fee.
The next question is from the line of Rohit Dokania from IDFC Securities.
Just one question. So sir, the sort of difference in EBITDA under the sort of earlier regime and this regime, which is almost like INR 60-odd crores. I think bulk of it is explained, sort of by the license fee. So if you said about INR 200 crores saving, probably INR 40 crores, INR 50 crores will be explained by that. What would be the other changes that could be there, sir, in terms of the difference in EBITDA in this regime versus the earlier one?
So it will be mainly the content cost which will be pass through. And there are 3 items on which we will get synergies this year also. It is box price, [indiscernible] and logistics. Interest, of course, in terms of percentage, we may not get. But whatever percentage benefit we got last year, will continue to be there this year also.Apart from that, like selling expenses, distribution service, will be linked to the number of new activations. And now under the new regime, more we sell, more we get commission. So the content cost may not be as steep going forward. Other items like the transponder and collection charge, the taxes will be same or in line with the revenue that is in the next 3 quarters.
Sure. Actually, my question was slightly different. I was asking, sir, your reported EBITDA is about INR 536 crores, and as for the earlier regime, it would have been INR 476 crores, so there's almost a difference of INR 60 crores. So I just wanted to understand what is causing this difference? So one, obviously, would be license fee, from a earlier regime to this regime, I'm talking from an accounting perspective. Is it entirely explained by license fee? Or is there something else as well?
No. Like Teleport income is nil this quarter, it has not been booked in our accounts. Now there are some savings in the connection cost which used to be 4%, now it is averaging around 3.4%, 3.5%. Of course, the personnel cost which was INR 65 crores to INR 70 crores is now INR 45 crores. So these are some of the items which have changed.
The next question is from the line of Alankar Garude from Macquarie.
My first question is on -- if you look at some of our competitors, so they have been looking to aggressively cut prices of set top boxes. So just wanted to get some sense from you, are we also looking to pare down our prices on the set top boxes? And similarly, I just wanted to know your thoughts on the current subsidy levels on the set top boxes, both standard definition and high definition?
See, the current subsidy is INR 1,520, which is lower by around INR 150 on average of last year. But in terms of the lowering our prices more going forwards [indiscernible].
You see, ultimately, you have to look at what the rest of the market is doing. I think luckily, we have been bringing down region -- getting through [indiscernible] costs of adoption. And that is helping us to be competitive in this market. Yes, there have been price growth on the set top boxes. I think they are pretty low and taking them any lower will not be advisable. But having said that, I think our costs are the best. And therefore, we are well placed to meet any such price competition in the market.
Understood, sir. My second question is on this Free Dish. Now with most of the FTA channels being pulled out by the major broadcasters, are you seeing any benefit from Free Dish? Or is it too early to really gauge the impact, the benefit coming in from this particular move by the broadcasters?
So I will say that customers have been in a wait and watch mode. They -- some of the [indiscernible] has definitely moved to other options, and we've also benefited from that. But having said that, a large number of customers are still hoping that they will have their channels back or other new channels substituting for the ones which have gone. And there are, of course, there are minimum channels in terms of entertainment, will be still available. So many customers are staying put. But also, I think it has opened up opportunity for other players, which we have capitalized upon during this quarter. But it really depends upon how that platform works and how customers react to that going forward.
Understood, sir. And one last question on the accounting. Any idea about what is the methodology being followed by the other players in the industry?
Same.
Okay. So all of them are now netting off the revenues?
Right.
Netting off the content cost. Okay.
Yes, DTH. All DTH.
The next question is from the line of Vishnu, K.G. from JM Financial.
Sir, 3 questions. So my first question is what is the total license fee provision as of June?
[indiscernible] as I said, it is around INR 50 crores to INR 55 crores.
Total provision. Provision.
Total provision is INR 2,950 crores, including interest of INR 1,100 crores.
Okay, sir. And in the last quarter, you had given in the guidance of INR 2,300 crores to INR 2,500 crores for EBITDA. So as per the new accounting, what would be the revised guidance, sir?
We have not given any guidance, but nevertheless. The new method may not change much the EBITDA except for the provision of license fees. Otherwise, the top line is changing, but not the EBITDA. Because rest of the item of expenses remains the same. The guidance for EBITDA this year will be around INR 2,250 crores to INR 2,300 crores, which is around 35% of the top line. And last year, the EBITDA was around INR 2,045 crores. So it is INR 200 crores or INR 250 crores more than the last year, which is around 10%.
12.5%.
Okay, sir. This is really helpful. Just to squeeze in a last question. So for this quarter, what was the CapEx? And what is the CapEx guidance for the entire year?
The CapEx was INR 205 crores. And for the full year, it will be in range of INR 650 crores to INR 675 crores.
That was the last question. I would now like to hand the conference over to Mr. Nanda for closing comments.
Yes. Thank you once again for joining us, ladies and gentlemen. We'll soon have the transcript of this call uploaded on our website, www.dishtv.in. And we look forward to speak to you again at the end of this -- the second quarter, or even earlier on a one-on-one basis.Thank you, and have a great day.