Dish TV India Ltd
NSE:DISHTV
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Dish TV India Ltd
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Thank you, Karuna. Good evening, ladies and gentlemen. Thank you for joining us at a short notice. We are here to discuss the results of Dish TV India Limited for the third quarter ended December 31, 2017.To discuss the results and performance, joining me today is Mr. Jawahar Goel, Chairman and Managing Director of the company. We also have the senior management team, including Mr. Anil Dua, the Chief Executive Officer; Mr. Rajeev Dalmia, the CFO; and Mr. Gaurav Goel, President, Business Development and Strategy. We will start with a brief statement from Mr. Jawahar Goel, 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. Goel to address the participants.
Thank you, Tarun. Good evening, ladies and gentlemen and thank you for joining us today for Dish TV's 39th earning conference call.Dish TV added 250,000 net subscribers during the third quarter of fiscal 2018, reaching a net subscriber base of 16.1 million at the end of the period. Net subscriber addition during the quarter witnessed a solid 22% jump over corresponding quarter.Operating revenue during the quarter stood at INR 7,408 million. Higher selling and distribution expenses around festival, however, led to a temporary impact on EBITDA, which closed at INR 2,005 million. Resultant EBITDA margin was 27.1%. Net loss reduced to INR 36 million as against INR 179 million in the preceding quarter.Television in India continues to remain as the cheapest and most wholesome means of entertainment for the masses. In the television distribution, DTH has presence in places where few other television service provider have reached. Dish TV, amongst such DTS player, has perhaps the deepest rural connect and hopes to benefit from rural India's increasing propensity to consume everything and include television content.Government's emphasis on increasing rural income and productivity, as per its budget document of 2018, should go a long way in increasing the spending capacity of the vast rural population of the country.On the merger front, Dish TV, on December 15, had secured Ministry of Information and Broadcasting approval to request made by the company for closing the merger of Videocon D2h into Dish TV. I'm glad to share that the company now intend to take further steps for effecting the said merger.Relevant intimations and e-forms shall be filed with the Registrar of Company (sic) [ Registrar of Companies ], Mumbai, in the last week of February 2018. Such filing date shall be the effective date for the said scheme. We remain extremely excited about the future of the merged entity and are raring to put the business in overdrive as soon as the merger completes. Though we had lost some time in FY '18, we would lug on to regain our leadership as well as expect the highest possible synergy in the year ahead and going forward.With that, I will like to open the floor for question-and-answer session.
[Operator Instructions] The first question is from the line of Vivekanand Subbaraman from AMBIT Capital.
Two questions here. One, on the previous synergy guidance of INR 5.1 billion EBITDA in FY '19, any thoughts on that? Any update there? And what about FY '20? And it would really help -- since now all the statutory approvals are in place, it would help if you split that out into various heads. That would really help us. That's point one. Secondly, any color on the rural market and DD Free Dish? And how your discussions with broadcasters have been in the recent past? You have outlined something in your earnings release highlighting behavior of rural consumers, particularly the ones who are opting for snacking packs and very small portion are opting for pay content. So any thoughts on how that translates into your content? Or rather, how that affects your dealing with the broadcast industry?
Yes, Vivekanand, as far as synergy is concerned, we remain intact with the figure of INR 510 crores. And in FY '20, we have estimated it will be around INR 750 crores. INR 510 crores, it will be coming out of the 5 major heads: set-top box, interest expenses, administration expenses, content and back-end services like call center. Out of this, I can share figure of the 3 heads. The box will be around INR 110 crore. The interest will be around, say, INR 75 crores to INR 80 crores, and the back-end operation will be INR 45 crore to INR 50 crore, and the balance will be out of content and other residual savings that will arise because of the merger. And the same analogy has been applied in '20 also.
Right. Small follow-up, Dalmia Ji. On the FY '20 number, that's a very large number that you've mentioned. What is extra in FY '20 compared to FY '19? Are you knocking off the Videocon transponder contract, which, I believe, is expiring in -- or coming up for renewal in May '19? Is that also factored into the INR 760 crore number that you've mentioned?
See, INR 510 crores will flow into '20 also. So the additional amount is only INR 250 crores.
Right.
This will anyway will come because of the large number of subscriber and some more synergy in the back-end services, which is consuming around INR 350 crore in both the companies now.
All right. Right, right, right. All right.
As far as Free Dish is concerned, Mr. Dua will reply.
So Vivekanand, you had asked about rural market and Free Dish and then you asked for broadcasters. On rural market, I think the last quarter being a festival quarter, we normally expect rural markets to do quite well. As we have mentioned in our release that while the effects of demonetization seem to have worn off, but rural markets are still not up to the speed, and that is why probably in the budget you heard lots of proposals, which are going to increase -- give increased outlays in various sectors in the rural areas. So clearly, rural being our strength, I think we stand to benefit from that. While currently it is still on a comeback kind of a path, I think going forward, it should accelerate and Dish TV should be ideally poised to benefit from that. As regards DD Free Dish and broadcasters, let me hand over to Mr. Jawahar Goel.
Well, on DD Free Dish, the government is not auctioning the slot. Almost 25 slot was not renewed. It is on temporary permission. Some of them has vacated that slot. Another 10 slots are coming up for renewal in the middle of February. The government has not yet announced a scheme how they will accommodate the broadcasters who are enjoying the rating and advertisement revenue on the strength of the Prasar Bharati platform. So well, Dish TV will had -- I will say that Dish TV was also doing 10, 20 channel on free-to-air basis, which was also stopped. So the traction on DD Free Dish is reducing day by day. On the broadcaster front, we had given the release that 1 broadcast we have tried Mera Apna Pack since July last year. We have 0.75 million of subscriber who had adopted 1, 2, 3, 4, 5 channels on pay -- à la carte basis. So that -- this is a result of that which we have mentioned in the -- as example.
Right, right. Jawahar Ji, on the revenue front, I understand DD Free Dish is now as a threat. You're seeing it is on the vain. But even from the demonetization lows, your revenue is flat. And also on a quarter-on-quarter basis, revenue has declined despite subscriber addition jumping as you've outlined. Is there any other reason? Or would you like to dwell on why revenue growth is so weak for you? And why is it continuing to diverge so sharply with Airtel? And of course, we've also looked at consumer companies, like Dabur reporting much better growth in rural market. So what is so specific about this category -- this consumption category in rural markets that there is so much pain?
Well, see, the Phase 4 of cable is not yet complete. We know that, and the MSO is also not able to collect the money from the revenue -- from the ground, Phase 3 and 4. Number two, the tax compliance at the LCO level is still a challenge. We want GST at second place. And we had seen that because of the telecom Jio and Airtel and fighting for the revenue, there was a player which has overread the Jio impact and lowered the table. So we had also factored this in the last quarter, even in festival season we give extra discount, extra piece to the customer to enroll them. But the impact on revenue will remain, but the company will always keep the EBITDA line more readable and more focused than the revenues. Because the definition of revenue, you know, we had reduced the collection cost and we had reduced the GST. So these are many things which are keep on happening. So turnover revenue is one issue. And the customer, we, when we enroll, give them extra. To retain the customer, we give them extra. To sample more channels, we give them freebie. So this is the environment at this moment we are in play.
[Operator Instructions] The next question is from the line of Kunal Vora from BNP Paribas.
First question, you mentioned that you will be able to see around INR 110 crore on set-top box. So can you share what are the current cost of set-top box? And what will the sourcing strategy going forward? And will there be some change? Would you look to purchase from Videocon, so like some elaboration on the INR 110 crores cost savings on set-top box?
I can give the current cost only, which is there in the balance sheet also, which is around $21.75 average for the year 2017/'18 till December. And I believe there is a saving of, say, $1.25. So [indiscernible] about this, we can get that much amount.
And that savings will come because of larger volumes or because of changing vendor? How will that saving come?
No, primarily because of volume. And the rest we can update in the next call when we have more clarity, like we have drawn a plan it has to be ratified, it has to be valuated and put to use. So it will be more in effect in the next quarter.
And this is just a very strategic question actually you are asking, which we will not like to discuss on this conference call actually.
Understood. Okay. Second question, sir -- okay, okay. Second question on what will be the net debt of the 2 companies, Dish TV and if you can share also Videocon's number? And what will be the license fees liabilities which both the companies have to pay? And when do we expect it to be paid?
Our net debt is INR 810 crores as on December 31. Videocon gross debt, I can say it was INR 1,960 crores. But the net figure, as far as I know, will be around INR 1,350 crores.
Okay, okay, okay. And license fees for both the companies...
You see, in our group it is around INR 950 crores. And they, because they don't provide for the license fee, as part of contingent liability, it is around INR 575 crores.
INR 575 crores, okay. And just one last question, if you can. You indicated that Jio does -- Jio did have some impact on your business. So what have you seen? While the customers are not cutting the cord, do you think some customers are down trading their packs because of Jio and like maybe they are like not taking some of the channels which they would have otherwise taken. What -- how is Jio impacting your business?
My reference was that one of the player has overread, overestimated Jio impact, and then they had to reduce the table. This was my reply.
Okay, okay, okay. So because of that, the pricing has come down for the industry as a whole?
Yes.
The next question is from the line of Amruta Pabalkar from Morgan Stanley.
This is Parag here. Just a couple of questions. Firstly, if you could just give us a better understanding of what's happening on the approval? If you know, I remember you had asked for an additional 60 days to think about the Videocon merger and you were looking for certain clarification. So any update on that would be helpful. The second is as far as license fees is concerned, with respect to these unpaid liabilities, is there any clarification you've got from either the regulators or the government with respect to how these will be discharged? Or if not, then any clarification on whether these liabilities will be required anymore going forward?
You see, as far as merger is concerned, we have already announced yesterday that we are going ahead with the merger, and the likely date of effectiveness will be, say, 25th or 26th of February. License fee, we continue to provide as per the licensing agreement. There is no new development in the court, which will decide the ultimate payment payability or nonpayability of the license fees.
So Dalmia Ji, just one clarification there. As far as license fees is concerned, that is unlikely to be a deterrent or an impediment for the merger. So there is no condition attached from the government's perspective with respect to discharging that liability before those mergers is consummated.
We already got MIB approval, which was after considering all those factors. And MIB has given approval on 15th of December. And we are going ahead only after that, and they have considered all the relevant factor, not only license fees, only then the merger approval was given. So was considered by CCI, so was considered by NCLT. So it has passed through all those processes. Now it is on and we will hit the merger finality in the last week of February.
See, this outstanding is sub judice in the court of law. So the liability is not...
Crystallized.
Crystallized. So that's why the normal relationship with the ministry is that they had kept this in the [indiscernible], this liability and the disputes.
Got it. And given the Videocon's liability has not been provided, it's off balance sheet, will that be taken onto the balance sheet as a part of the merger?
We are discussing with our auditor that whether to adopt their policy or we should adopt our policy. Maybe by 31st March, there will be a solution. But as far as prudent accounting goals, we should provide further internally, like we have been doing in the last 10, 11 years.
The next question is from the line of Rajiv Sharma from HSBC.
So just comparing your performance with Bharti this quarter, and they've done good on the subscriber additions as well and their ARPUs have been stable this quarter. So what do you think is that ARPUs at our end have gone down? Because if there has been an industry-wide price cut by any of the player, Tata Sky or Bharti, if that is the case you're referring to, then it should have been visible in Bharti's number which is not the case. And price cut should have led to -- plus the festive season ideally should lead to 0.4 or some numbers around those kind of net additions which you are not seeing. So what do you think is driving that? Second, on your recharge frequency, are you seeing any impact of data cannibalizing the revenue stream delays or subscribers going nonactive? And third question is, I understand you've drawn up a plan around cost savings from your proposed merger. But what are the areas where you plan to invest in the upcoming merger?
Okay. Rajiv, on the first question, which is on ARPUs and comparison with other players, if you look at our absolute performance, our net adds are the best in last 5 quarters, 2.5 lakh net adds. Even if you look at our gross adds, which are 6.4 lakh, which are higher than 5.7 lakh in the previous quarter and higher than 6.3 lakh in the same festival quarter last year. So fundamentally, we've managed to attract many more customers to our platform than we've done in last 5 quarters. Secondly, as far as the ARPU is concerned, you see we ended the last year at an ARPU of INR 134. And this year, we've been trying to you know -- and that's because of what Jawahar Ji said in terms of some players reacting rather violently to the set of Jio and lowering the price table which if you see happened early 2017, and that did impact the ARPUs throughout the year, especially customers down the box-set, et cetera, are more susceptible to that kind of pricing. We, however, have managed to upper ARPU to the range of INR 145 to INR 150 throughout this year. So there's INR 134 at which we exited. Now these fluctuations of INR 4 or INR 5 send a result of various factors. For example, we started Mera Apna Pack. Now some customers, who are probably earlier buying INR 50, INR 60 à la carte pack may buy 2 to 3 packs, INR 20, INR 30 but they may get several more customers in my fold who are trying to buy à la carte packs from me. But overall ARPU can therefore fluctuate in a small band from quarter-to-quarter. And we've had previous quarters at INR 148, INR 149, and the next quarter could be in the same range. So this, I will say, is an upside which we've seen from where we ended at INR 134. And we feel that with now Mera Apna Pack gaining momentum, with our HD plans that we launched last year gaining momentum, these will bring us incremental ARPU in the coming quarters. On the cost saving part, I'd ask Dalmia Ji to comment.
Yes. Most of the investment will go around the technology, but I cannot share the exact figure that how much amount is [indiscernible] investment purpose.
And sir, it's useful on the investments. We're just trying to understand then we should be looking synergies at a net basis rather than gross basis?
No, I have done that, and INR 510 crores in terms of cost saving is on the profit and loss account. But on balance sheet side also we have done both on account of investment as well as other debtor-creditor adjustment which will arrive because of the merger of their entity. So net-to-net impact is not much.
And on your previous explanation of the ARPU decline, even in the last quarter, we were talking about a 8% revenue growth for the full year. And this was the same. Previous fiscal also we were talking about similar revenue growth. But both the last 2 years, we've been very flat on revenue growth. So what if that happens, you know, midyear, mid-half, post mid-half of the fiscal that the delivery of that 7%, 8% becomes tough and we end up being flat for the full year?
I think the year is still on and fundamentally the thing is that despite ARPU going down from INR 149 to INR 144 from last quarter to this quarter. The overall turnover revenue is at the same INR 756 crore level, which is on the strength of the additional subscribers that we've been able to attract with the lower price staple that we spoke about earlier, it is definitely kind of putting that pressure on revenue. But I think thanks to our quest of additional subscribers, which we've got as we discussed best in last 5 quarters, we managed to maintain the same revenue.[Technical Difficulty]
Ladies and gentlemen, there seems to be audio loss from the management line. We request you to please stay connected while we have the management reconnected.Ladies and gentlemen, thank you for being on hold. We have the management reconnected. So over to you. And we still have Rajiv Sharma from HSBC in the question queue. Sir, can you hear us?
Hello?
Yes, sir. You can hear us?
Yes, we can.
Yes, sir. So we still have Rajiv Sharma in the question queue from HSBC.
So Rajiv, could you hear my response on ARPU?
Yes. We've lost you halfway, but yes, you mentioned about the various initiatives and if there -- I don't know if there is something more to add there?
Yes, I would say despite lower ARPU, our revenues have not declined. Our revenues have managed to be at the same level as INR 756 crores previous quarter. And hopefully, with all these new packs and initiatives, we should see the incremental revenue coming in future.
And one just last bookkeeping question quickly. From when Videocon gets into your business, so from a revenue accounting and cost accounting purpose, is it a similar line-by-line addition? Or there are some different policies which may result in a different revenue and EBITDA numbers?
Revenue number and EBITDA number will not change. But the asset allocation will be based on the fair value because of the operation of IND AS and of other guidelines which will be governing the merger accounting. But as far as revenue is concerned, we will be guided by Accounting Standard 115, which is the new standard, and the usual AS 9 of The Institute of Chartered Accountants of India, there will be no change. But the first balance sheet, which will be from, say, 1st of April, 2018, the assets and liabilities merger will be built on fair value and not line-by-line valuation.
The next question is from the line of Vikash Mantri from ICICI Securities.
Two questions. What is the significance of the reclassification of the few of the promoters into public category? And what is the -- is there anything that can go or approval need to be taken yet for the merger to go through? Basically asking that can there be a situation now that the merger doesn't happen?
See, reclassification is a routine exercise, like many of the promoters have started and instituted it. So it is only by way of that official reclassification, Mr. Subhash Chandra will no longer be a promoter of the company. And balance promoters will continue to be chief promoters. The promoters holding today is 64% and after the reclassification, the promoter holding will go down by 10%, and it will be 54%. That's the only change.
But sir, after the merger, then it will go down much further?
No. After the merger, it was supposed to be 36%. So it will be around 31%, 32% as far as promoter is concerned. And we will be acquiring additional 10% in the next 1 year. So we will be around 42%, and Videocon will be 18%, and 10% will be owned by Mr. Subhash Chandra and his companies and the balance 14%, 15% will be by junior holder, rest will be by the Indian public. The second question was on merger. Well, as far as merger is concerned, now all the approvals are in place. We have already given a notice for the effective date, which will be around last week of February. Most probably as voting goes, it will be around 25th or 26th of February. And there is no roadblock. Only [ JDR ] listing is required, which we hope will be completed by, say, 20th or 21st of February.
The next question is from the line of Amit Kumar from Investec.
Actually just sort of continuing from one of the points that you mentioned in response to the previous caller, so aside from the deal closure, the post-deal buyout sort of also remains in place? Because our understanding looking at the Videocon D2h balance sheet was that the Videocon details promoter shareholding was largely pledged. In fact, almost 95% of their shareholding in Videocon D2h is pledged, which is not sort of clear to us. Given the fact that those shares are pledged, I mean, how will you be able to sort of buyback shareholding post the merger. There is absolute clarity on acquiring additional 5% immediately and 5% within 12 months post the deal closure.
There is an agreement between the 2 promoter to purchase 10% sales into sequence: 5% immediately after the merger and 5% after 1 year. That agreement is also filed with the stock exchange. So it will be addition to it.
All right. Understood. Sir, my second question was with respect to these long-term packages that you had introduced, 6-month, 12-month kind of packages. Could you give us some color on how many subscribers are there on these packages right now?
So Amit, we were running promotions earlier part of this year which was like [Foreign Language]. Sometime in the last quarter we stopped all that, July, August. And instead we came up with a uniform pricing policy, which is a kind of a 10% kind of benefit to anyone subscribing for 3 months and more or a 20% benefit for anyone subscribing for 12 months and more. So this has worked quite well for us. On one side introduces all the promotional cost. On the other side, this gets more and more customers locked in on a regular basis, not only during the period of promotion but on an ongoing basis. We keep getting more and more customers locking into our longer pay terms which certainly is healthier than less [ indiscernible ] from a business point of view. So today we have more than 25% of our recharges happening on data in terms of numbers. So this percentage is growing and which is healthier for the business.
Yes. Amit, just one change. The agreement is not filed with stock exchange, but the intimation is given to the stock exchange.
Understood that, sir. Sir, incrementally 25% recharges are happening on those long-term packages, but what...
25% of total recharges.
Sorry?
25% of total recharge is happening on those packages.
Understood. But how does the existing subscriber -- I mean, is this the same as saying that 4 million -- I mean, out of 16 million, 4 million subscribers are on long-term packages, no, right? I mean, this would be an incremental.
No. 16 million is historical kind of evolution of the base. What I'm saying is today the people who are recharging, 25% of them are paying us on this pay term on daily recharge....
So either 3 months or longer is actually...
That's right.
All right. And sir final question. The Mera Apna Pack is only to understand what does it mean in terms of incremental revenue and incremental gross contribution. So you sort of seem to indicate that guide which we're taking earlier soft of small package is INR 50, those kind of packages. They can now because you can choose à la carte. So they are going -- they might be -- instead of INR 50, they might be paying you only INR 20, INR 30 over the base package essentially. So that way revenue sort of seems to be going down. But what does that mean in terms of your content cost also? Because that INR 50 package could have 10 or 15 channels versus when they are picking only 2 or 3 channels out of it. Correspondingly, your payout to broadcasters, do they sort of go down? Or the deals are sort of fixed so you actually net-net lose out in terms of rough contribution?
We had lost you, Amit, in between, but I assume we've understood your question. On this Mera Apna Pack versus à la carte pack, let me clarify to you that we are, of course, [Audio Gap] those à la carte packs which were priced, let's say, at INR 60, INR 50 for movie pack or GEC packs, et cetera, but we wanted to widen our base, the number of people who are able to take these additional packs over and above the base pack that they have. And also, we wanted people you know especially in our kind of customer areas just gives us huge competitive positioning vis-à-vis, let's say, cable and other operators in the market. So what we managed to do is that our total base who's today subscribing to à la carte packs, Mera Apna Packs has really grown. So a lot of our customers who are on à la carte pack are still there, but lots of new customers who had never tried taking an à la carte, as Jawahar Ji said, 0.75 million, which is 7.5 lakh customers who have taken about 14 lakh Mera Apna Packs. And from a customer point of view, standard-definition patches at INR 10 and high-definition channel at INR 20, so this has really widened the net for us. And as this habit grows, we expect people to take additional channels. So today, the number stands at 2 channels per customer. This could grow faster as the habit of Mera Apna Pack forms. And that will lead in a growth in ARPU. On the market side of Mera Apna Pack versus that difficult.
Very difficult to derive the content cost out of that because contract...
So, no, basically, what I'm just trying to understand is that depending upon -- because our understanding is that content contracts are not on per channel basis, right? They are either on a per customer basis or they are on fixed fee essentially. So as you get these customers -- I mean as a sort of customers little bit even if there's a shift from à la carte to Mera Apna Pack, this is gross margin accretive or it is gross contribution accretive or it is gross contribution dilutive.
Amit, if you see the [indiscernible] contain, it still continues to be below 30%. So we are well within the budgeted figure of around 30%, 31%. And at EBITDA level, we are more positive that the usual PAT wise revenue that we generate from these subscribers -- or from this kind of revenue.
Okay. So what would be the content cost for this particular quarter given that for the last 2 quarters. So if you can help me with that?
Content costs for...
Quarter.
This quarter.
It was INR 245.
The next question is from the line of Dipesh Mehta from SBICAP Securities Limited.
Most of the question has been answered. But just to get 2, 3 data points kind of thing. What would be now our HD base? And I think we are focusing on HD base for last few quarters. So if you can help us understand why it is not helping us in terms of ARPU because some of your peers is also benefiting from that shift playing out? Second question is about what is the subsidy or subscriber acquisition cost which we are currently running at? And the last one is about the savings, which you mentioned about INR 5 billion and INR 7.5 billion. How much would be brought back into the business kind of thing? If you can provide some color or it would be the net benefit which you envisaged for the combined entity?
Okay. Dipesh, on the first question, let me answer on the high definition. That has been our focus last quarter, it's been extremely successful. There are in this quarter about 4 lakh gross adds out of INR 6.4 lakh that I spoke about. That compares to 2 lakh, which had happened in the same festival quarter last year and compares to 3.4 lakhs in the previous quarter. So clearly, on high-definition side, we've upped the ante, and we have -- in fact, the incremental share I'm told it is about 38% in the last quarter of the total HD additions that have happened in the market. On your linkage to ARPU, this is something, which, I think, is a financial which will show impact in the coming quarters because we got people into the habit of trying this not for free but for a small cost. So we had a pack called -- an à la carte pack on HD, which was INR 49, which many people have tried on top of their base pack. Now our intent is to upgrade this people further to our packs, which are at INR 99, INR 165, INR 230. So we feel that is a roadmap to increase the ARPU from these customers who we have got on our HD base now. On subscriber acquisition costs and merger synergies...
The subscriber acquisition cost is around INR 1,510 for the quarter. And the merger synergy of INR 510 is on the gross basis. That is the total amount that we'll accrue additionally on account of synergies that will[Audio Gap]
Just to follow up on the -- first part is about the HD. So now can you help us understand what will be the overall HD base for us out of, let's say, 15 million plus what we have?
So We have 3.4 million out of 16 million.
Okay. And the second one on the savings part, which we referred about gross basis. So considering the investment, how much you expect it to flow through net basis kind of thing on P&L? And whether it would be Q4 when we report console number kind of thing?
It is gladly, you know netting out of profit and loss account. What you're asking is free cash flow. So when we do the accounting for asset investment or investment in the new technology or revision in technology that will be coming by way of a fixed asset. It will not flow through EBITDA or profit and loss account. Only some amount of depreciation will increase. In free cash flow, there will be an impact, but that will be neutralized by the adjustment that will be there on account of sundry debtor and sundry creditor, which will be coming from D2h.
So there would be no FCF kind of implication because of the...
I would say very small implication in the first year.
Understood. And sir, last is about license fee which you referred to whether there is any recourse, let's say, one, if government decide or court decides in future, that companies need to pay that license fee, which is currently in our balance sheet part of contingent liability and video call is off balance sheet. Then we have to bear it or we have some agreement where Videocon erstwhile promoted nets through take.
After the merger, the entire assets and liability will flow to us.
So that would be then our kind of thing?
License fees part of that liability.
The next question is from the line of Himanshu Shah from HDFC Securities.
Yes, sir. Sir, if you can just help with the revenue breakup and churn percentage during the quarter?
Revenue breakup, INR 692 crores is subscription revenue.
Yes. Sir other one?
That is INR 692 crores.
Okay.
Bandwidth was INR 22.5 crores. That would be INR 14.5 crores. Other operating income, INR 5.5 crores.
Okay, sir. Sir, secondly now if I just see our last 2 years' performance I know couple of other analysts have also asked, like, 2 years back, we were doing around INR 250 crores, INR 260 crores EBITDA, Airtel also was at similar number on a quarterly basis. Today, they are probably 50% higher than from that number whereas we are 30% down. So how do we see gaining, means, what differently we are trying to do in the business in terms of probably improving our subscriber mix distribution strategy, if you can throw some light some color to improve the EBITDA number other than on the cost side or synergy, sir.
This is a very holistic question which we have answered in part throughout the call at different stages. Like, why the revenue is what revenue is. We are trying and making all our endeavor so that the revenue from HD subscribers moves faster than the downgrading which is taking place from the standard definition. If that is being neutralized or that is been negated then the revenue will start flowing in. whatever good work is done by the company on account of HD upgrade HD new subscribers, HD à la carte is going not in the revenue front because on a standard definition, we see lot of traction of the subscribers who go downward or to adapt lower level of packs, so that is creating problems. And since you know we had a pool of subscribers coming from [indiscernible] area so that correction will take maybe few quarters when we will be able to overcome that challenge and HD will rule like it is ruling in Tata Sky and Airtel and revenue will flow much faster than what it is doing today.
So just one or two more follow-ups. Sir, out of the HD subbase of 3.4 million subs, how much would be on actual HD pack subscribing to actual HD pack?
Yes, it will be around 1.6 million to 1.8 million, and balance around SD or SD plus HD à la carte.
Okay. And so what proportion of subscribers would be nonpaying or in 0 to 120-day bucket?
Out of these 3.4 million?
No, out of the total of 15 million, 16 million subs what we are reporting, 16 million subs?
No, we have been reporting this number on the basis of 122 days -- 120 days. Let us remain at that.
So, sir, what would be the proportion of subs in 0 to 120-day bucket, if you can just provide some color on nonpaying subs in the 16 million subbase.
They are not nonpaying. They are partially paying delinquent and paying for part of the year? Absolute nonpaying will be very few subscribers and maybe in the next call we will provide that figure also. Today, we're not ready with that figure.
The next question is from the line of Naval Seth from Emkay Global.
My question is, again, on the EBITDA front. When merger was announced, we were in the range of INR 250 crores, INR 260 crores of EBITDA, while we have fallen off to now INR 200-odd crores quarterly run rate. So from shareholder point of view, if I look at, has the EBITDA bottomed? Or we would see EBITDA growth only coming from cost synergies in next 2 years and then waiting for revenue accretion driving the EBITDA beyond FY '20, as you stated HD would start contributing?
See, this quarter EBITDA had 2 exceptional element. We had to provide INR 22 crore additionally for the carriage element, and also for the box which are not in use. This was a special, I would say, attestation by the auditor that boxes which are not in use should be provided as we are eating the merger. So if we keep the things clean it will be better. So this amount was INR 22 crores. And there was an amount of INR 11 crores in the content cost, which we were not able to take the benefit because the proper documentation was not done, so this will flow in the fourth quarter. So there was an impact of around INR 33 crores in this quarter because of exceptional, I would say, circumstances. And in the next quarter, we will be on a normal basis and may hit the figure that you quoted in your call.
Okay, okay. And sir, second question on GST. Should we assume that GST benefit which was supposed to come in has been eaten away by the competitive intensity as pricing has fallen off? Because in the earlier calls you had mentioned there were some long-term packs. However, impact of that was not visible on GST of new rate. So how should we assume? Is that now done and dusted or one should still hope for GST-led benefits?
In our case, around 80% of the benefit has flown, as far as GST is concerned. 20% subscribers will be -- which we are on a long-term basis, I think that will also be over by March.
So that means, sir, pricing has fallen off substantially. Despite of GST benefits kicking in, our ARPU has declined on sequential basis. So how should we assume or what should be the revenue growth one should expect? As in, revenue pressure continues over there, however, HD pack acceptance is a long-term process. So will revenue growth come back to double-digit in next 2 years anytime or it's again a hope?
The problem is, before the GST was announced 99 pack was announced around January. So the price table was already low. And GST gave us around 2.5% to 3% benefit. If I combine the service tax as well as the entertainment tax.
Future.
Future. As you know that if the HD subscribers remain the way they are and tariff order is announced, then we will have much better place and room to play than what we have today because of the mix of subscribers that we have acquired over number of years.
And sir, last question on churn rate.
It was 0.79% this quarter. 0.8%, you can say.
Next question is from the line of Rohit Dokania from IDFC Securities.
Just 2 questions from my side. Could you talk about the time line of the listing of the combined entity?
It will be around 15th of March, that is -- that also we cannot commit. Let us stick to the point of effective date, which is we have said last week of February. Then whatever sign taken by the stock exchange, that will be there.
Sure. But we wouldn't require -- just to follow-up on this, we wouldn't require any special approval, again, from NCLT to change the effective date chart? Because earlier, I believe it was 1st October '17.
We already got it. Only after that we have proceeded.
Okay, great. Sir, the second and the last question is, so post the transaction and post sort of you acquiring 10% stake from the Videocon promoters, do we have a right first refusal for the rest of the stake that the promoters own?
This I cannot describe over a call which is for the quarterly result.
The next question is from the line of Jay Doshi from Kotak Securities.
Couple of bookkeeping questions. First of all, sir, you mentioned about licensee liability, which is, in your case, may be a little more than INR 900 crores and for Videocon, close to INR 600 crores, which is contingent liability. Now these numbers, at least in case of Videocon, we are aware that for the past 2 or 3 years there has not been much update on any increase in this liability number. Earlier in past, until 2013, '14, if I recall correctly, every year there were change based on the claim that government used to -- claim notice that government used to send and these liability numbers used to go up. Now for the past 2 or 3 years, both Dish TV and Videocon, has been paying a number which is lower than what, at least, in the earlier years what was provided for. So is there anything else over and above this, what you have indicated that can come up? Second is, last year you changed the structure and -- to make it more tax efficient. Have you received sort of any kind of acknowledgment from the government whether it is acceptable? Or there can be a possibility that they can come back with some tax claims around that as well? So some clarity on this. And whether the number that Videocon has indicated INR 575 crores, does it include interest tax interest or it's just pure liability, and interest can be over and above that?
See now a days, say, this is 10% of the gross total revenue, and we are paying in full as per the TDSAT order which was given on 28 of May 2010. And balance is being provided in the liability side, and the total amount, as I said, is near about INR 1,000 crores. In case of D2h, they are paying formula of TDSAT and the balance amount, which is payable but not paid as per the licensing agreement or you can say 10% of the gross DTH revenue is treated as contingent liability and it is coming as notes to account in their balance sheet. If I add these 2 figures, it is around INR 1,500 crores -- INR 1,600 crores. And as far as dip in fare is concerned, we are fully confident that the steps taken by the company for licensing arrangement and other infra services which is provided by the Dish Infra is fully within the law. And we have not received any notice or message contrary to that from any ministry.
And sorry, I may have missed it. The INR 1,600 crores number includes the interest cost provisioning for both the companies? Or...
No. In our case, the INR 1,000 crores is not interest. Interest is well over and above -- above and over that. And in case of Videocon, they are not providing interest. See, interest is not provided by even Airtel and Tata Sky and Videocon. We are the only company which is providing interest as a prudent, I would say, accounting practice.
Understood. And another small bookkeeping question. Now Videocon, they amortize lease rental over period like Dish TV used to do it earlier. And so going forward, will -- starting next year, will these rental be fully amortized in the first year itself, so the balance which is there on balance sheet which would be, I think, around INR 200 crores. So will that be booked as revenue in FY 2019, assuming you will -- I'm assuming you would align Videocon's P&L with Dish TV's accounting?
Now both the company will have to change because of the new accounting standard, which is AS 115. And as per that standard, we have to book activation revenue as per the average life of the customer. So there will be some shift in the revenue in the year going forward. We will come out with detail in the next call.
The next question is from the line of Ankur Periwal from Axis Capital.
Just on the subscriber addition front, since last 2 years, '17 as well '18, the sub addition for us has come down significantly versus the earlier history. Do you think post-merger, we can see uptick in terms of consolidated adds -- subscriber addition overall?
Yes, that's the hope, Ankur. We are working towards it. I think we have spoken about cost synergies, but certainly, we want to look at top line synergies as well as the 2 platforms come together. There are individual plans that both the platforms have, both have been driving the net add this year. And we hope that as the 2 platforms come together, we'll be able to drive this faster.
Yes. So -- and just to a follow-up to it. The tie-ups that DTH has -- Dish TV has, or D2h has, both of them will be combined and those deals will continue going ahead as a combined entity. Is that understanding correct?
Yes, yes. Even the true brand will operate for some time in order to attract same customers. And so that there is no impact immediately on the new activism.
Sure, that's helpful. Sir, last question. On the TRAI's content pricing regulation, any updates over there? Because I think there was some meeting due in the month of February.
I think the matter is still reserved for order at Chennai High Court. And as we heard that broadcasters and government of India and TRAI, they jointly mentioned before the Chief Justice of Madras High Court. And there was a assurance given that the order will be pronounced in a week's time. If that is prolonged, then maybe we have heard that the third party that its preparing themself to go to Supreme Court as well for pronunciation of judgment.
We take the last question from the line of Vaibhav Badjatya from HNI Investments (sic) [ HNI Investment ].
So is there any change in the customs -- custom duty or in the -- or in set-top box during the budget? And if yes, what would be the impact on our stack going forward?
Yes. There is a reduction of custom duty on set-top box. It has moved down from 20% to 10%.
Okay. So that will reduce our subscriber acquisition cost, right?
Yes, more of less.
Thank you. Ladies and gentlemen, this was the last question for today. I now hand over the floor back to Mr. Nanda for his closing comments. Over to you, sir.
Thank you once again, for joining us, ladies and gentlemen. We look forward to speak to you again at the end of the fourth quarter or even early on a one-on-one basis. The transcript of this call would be on our website very soon. Thank you, and have a great day.