Dish TV India Ltd
NSE:DISHTV
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Dish TV India Ltd
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Ladies and gentlemen, good day, and welcome to the Dish TV India Limited Q4 FY '19 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Tarun Nanda. Thank you. And over to you, sir.
Thank you. Good evening, ladies and gentlemen. Our apologies once again to our rescheduling this call, and thank you very much for joining us today for this Fourth Quarter FY '19 Earnings Conference Call of Dish TV India Limited. To discuss the results and performance, we have Mr. Jawahar Goel, Chairman and Managing Director of Dish TV; we also have Mr. Anil Dua, who is the group CEO; and Mr. Rajeev Dalmia, the Chief Financial Officer. We will start with a brief statement from Mr. Anil Dua and we'll then open the discussion for questions and answers. Quickly, I would like to remind everybody that anything that we say during this call that refers to 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. Anil Dua to address the participants.
Thank you. Good evening, ladies and gentlemen, and thank you for joining us today for the fourth quarter and year ended March 31, 2019, earnings conference call. I'm sure you would have had the opportunity to go through the results and the earnings release, both of which have been uploaded on the company's website. I'm glad to share that Dish TV India Limited maintained its market leadership in the DTH space during FY '19. The company added 47,000 subscribers during the fourth quarter, exiting fiscal 2019 with a net base of 23.7 million subscribers and growing. Dish TV India completed 1 year of Videocon d2h merger with Dish TV in the fourth quarter of fiscal 2019. Merger synergies realized from almost every operating expense line item, net EBITDA margin to expand to 33.2% at the end of fiscal 2019. The television industry had its fair share of ups and downs during the year due to regulatory and perception-driven challenges. The fourth quarter of fiscal 2019 witnessed pay-TV distribution platforms continuing their drive to migrate subscribers to the new tariff regime. However, with the Tariff Order deadline shifting from December 28 to January 31, 2019, to February 20, 2019, pay-TV subscribers remained unsure about channel selection. January and February therefore saw huge inquiries and call surge at call centers. This surge of customers, along with shifting implementation deadline and a few technological challenges, weighed heavy on recharges and acquisitions during the first 2 months of the quarter with subscribers deferring the charges for weeks at a stretch.Dish TV's fourth quarter revenues were therefore impacted due to transition to the new regulatory regime. Fourth quarter fiscal 2019 consolidated subscription and operating revenues stood at INR 13,083 million and INR 13,987 million, respectively. EBITDA for the quarter stood at INR 4,150 million, up 3.6% Y-o-Y. EBITDA margin was at 29.7%, up 350 basis points Y-on-Y. There was a sharp turnaround in the third month of the quarter. Improvement in business performance in March set the ground for an even stronger growth in the years ahead. In fact, FY '20 started on a strong note with the general elections keeping viewers hooked on to their televisions. The soon-to-start Cricket World Cup should further engage the television-viewing matches, bringing revenue growth to the business. The year is also going to become first full year seeing the positive impact of the now well-in-place Tariff Order. We strongly believe that the new regulatory regime will bring the much-needed transparency in the industry, thus helping distribution platforms, like Dish TV India, command a premium for its nationwide reach. The current year should be a landmark year for Dish TV with market-leading revenue and EBITDA growth. The new regulatory regime, along with continuing synergies, should further help us increase our EBITDA per subscriber during the year. With a strong semi-urban and rural base, Dish TV India also stands to benefit from the withdrawal of Hindi entertainment and movie channels by the top 4 broadcasters from the DD Free Dish platform. The company has been strategically targeting Free Dish subscribers with attractive recharge schemes and bundled acquisition offers. We are also excited about the future of Watcho, the in-house OTT app that was launched during the quarter, and believe that it would ensure viewing stickiness on our platform. 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.
I'll start with some financial questions. Gross and net debt number and also the content cost, that would be helpful. And other financial questions pertain to the impairment of loans and advances to Lanka, Dish Lanka. Why is that the case? I'll move to the next question after you answer this.
Yes. The gross debt was INR 2,250 million and the net debt was INR 2,070 million. And the impairment was a decision of the auditor as there was some delay in the implementation of the project because of which we see that the revenue will be coming as desired by the management at a later date. So the local auditor in Sri Lanka decided that it should be impaired, which was supported by the holding company auditor. So that is why we had to get the impairment because now we are in the regime of Ind AS, wherein auditor will take a call for the impairment or otherwise. So that is how it was done.
But sir, this is an entity owned by us, right, so we have deployed this amount in operations, right?
No. This was mainly used for establishment of a broadcasting center, initial infra support services and then losses incurred for the initial period in order to obtain the required number of subscribers. It was a combination of OpEx and CapEx as we receive the DTH India also. So nothing wrong with the business per se. But because of the operation of Ind AS and revenue is not matching with the desired projection, which was shared with the auditor, I think in the 2 years or 3 years, then these days they tend to act on a conservative basis and insist for the impairment.
Right. Okay. Understood. And what about content cost?
See now the content cost is under FBO regime, so that I think will be answer.
But what was the number for fiscal '19 at least? Because that -- the Tariff Order got implemented from 1st Feb, right, so...
Yes, the actual number for the year was around INR 2,275 crores for this year, '18 and '19.
Great. So Dalmiaji, on this content cost, are we now booking revenue? Or does it not make sense to book revenue net of the content cost because we are just collecting the revenue on behalf of the broadcasters and getting a share from that? And commensurately, aren't we now providing -- or rather paying license fee on a lower revenue number than before?
We have discussed this matter with the auditor. And I've also obtained an opinion from a Supreme Court lawyer. But we are awaiting another opinion on the similar line. Then as an industry, we'll be booking only that part of income, which is attributable to us, which will be 35% max of the content cost plus the INR 130, which is the NCF. But I think it will take another 15, 20 days before all 4 of us start doing the same thing and pay license fee on the basis of the income, which is realized by us and not on the income, which is the past-through item between us and the broadcaster.
And to add here, I'm Jawahar Goel. We have written to TRAI to make a recommendation to the government to this context. And they had at least verbally assured us that on 6th of June, they will issue some consultation, a brief consultation and then recommend to the government.
Okay. Understood. Second set of questions pertain to the business. You have claimed that 93% of your customers have migrated to the new regime. Is it possible for you to explain to us how many or what percentage of these customers have migrated to a-la-carte channel packages rather than the packages that you have suggested?
Well, this is a competitive information and we would like to keep it to ourselves. And of course, through the broadcaster, there is 2 price points: one is the bouquet and another is a-la-carte rate. So we will give them the same number as we arrive to the conclusion with the broadcaster. And this is something we cannot share with -- this is different for each broadcaster.
Sir, no problem. I understand. And when you mentioned your expectation of prices getting rationalized and that will drive consumption, now we are already seeing that some DPOs, like your south-based competitor, they are -- they seem to be offering a whole host of content in very low-priced packages. It appears as though they are not even charging INR 153 as network capacity fee. If this kind of packaging is done by some of your competitors, how is the new Tariff Order going to be any different from prior -- the previous regime in terms of your expectations of an improved EBITDA per subscriber?
I think what you are talking about is Tamil Nadu, right?
That's right. Yes, sir.
Mostly in Tamil Nadu. So in Tamil Nadu, there are analog subscribers are still continuing and there's a lot of disting -- big -- it is a government-run cable companies, right? And the broadcaster had influenced in the past to BARC not to give rating on the analog [indiscernible]. So that we had discussed in the last conference call, if you remember that. So lately, I don't know that even you are to ask the broadcasters if they or BARC, what they are doing. That's one. Number two, we -- as a DTH operator, we have been doing business in Tamil Nadu. And the subscribers are quite clear, whoever has the DTH, so they remain there. But on new customer acquisition, Sun TV has been quite aggressive, Sun DTH, in order to protect their consumer base, distribution platform for the content purpose. So that scenario and the logic are different for Tamil Nadu basically and which is not relevant for the rest of the market.
Vivekanand, I also want to clarify, you said that we migrated 93% of our base. I think you're quoting from our earnings release. We've actually migrated 100% of our base -- our subscriber base, not 93%. What the earnings release says that 93%, our survey showed, has given a thumbs-up to the migration, which means that there is a lot of noise that customers are not happy, but actually what the point we're making is that we're pretty happy with the migration as our survey shows.
Apologies, sir. My interpretation error, I'm sorry for that. Last question is on the number that you have mentioned of March 2019 average revenue being 18% higher than the Jan and Feb average. Is this for entire month or the daily decrement number? Again I'm asking because the number of days itself would increase revenue by 5%.
Yes. So it is for the month.
Yes. It is for the month.
And basically, you also see there a figure of 156%. So actually, December, January, February, all 3 months, we started to prepare for migration. But since the migration date shifted, so in all 3 months, the uncertainty that the customer faced led to wait and watch attitude or getting onto only basic packages by the customers, which impacted our revenues during these 3 months, December, January, February. But March, once the clarity was there, I think everyone came back with a big bang. And that's why you see this figures of 156% and 18%. And thankfully, that turnaround has continued and we are hoping to build on it now.
The next question is from the line of Yogesh Kirve from B&K Securities.
Firstly, on the ARPU, so during the quarter, it came off [indiscernible] which was there. But can you confirm what has been the ARPU for the March or in the -- or April and May? Has it reverted to the pre-NTO levels?
So yes, in March, it has reverted. I cannot give you month-wise ARPUs. But what I can share with you, that the ARPU for the year is at INR 202, which, of course, we will admit it, March has even better number. But this is more or less in line with the ARPUs that was there in the pre-NTO regime.
Okay. Fine. That's helpful. Secondly, regarding the content cost, I mean I was referring to the notes to the account and you mentioned that the costs were booked as per the old contracts and I imagine and believe that under new NTO, the content cost should not change. So is that likely to be so? I mean are there any benefits or any impact on a sustainable basis because of the NTO?
Sure, for the month of -- up to the March, it was in status quo. But these impacts will come from the current quarter and it will continue to be for the whole year. And as per the calculation that we have done in the month of April and May, there are benefits and the cost is lower if we compare it with the last quarter. And as these consumers mature and they start adopting more and more, the more benefits on an average will continue in the quarter going forward.
So you mentioned that the content cost for the full year was about INR 2,275 crores in FY '19. So FY '20, I mean is it fair to assume that the figure should be stable or only marginally higher in FY '20?
Yes. This is Jawahar again. You'll see one component of the regulation that the bouquet price and the a-la-carte price, total of that cannot be more than 14%, 15%. That was agreed by the Supreme Court and so -- High Court. So this has to now -- it is for the TRAI, they are realizing that the channel price at INR 29 is available in a bouquet about INR 5 or INR 6. So this normally has to go away. We are talking to TRAI and all the DPO community to sort out this matter. As the consumer prices have not come down, the TRAI is also a little bit concerned that the a-la-carte price in case of channels are artificially high. So we have to wait for some more time to make a judgment that how it is going to happen in 2019, 2020.
Sure, sir. And sir, finally, regarding the Watcho, I mean can you just talk about what are the investments that we have planned in this business and any idea on how the business model should be there in terms of revenues and turnaround or the breakeven that we are targeting?
So I think in the last call, we had shared that we have invested INR 35 crores in Watcho. Figure remains in that ballpark, INR 35 crores to INR 40 crores. We are -- we have just launched it about less than a couple of months back. And what we find is that even without much marketing, it's getting very good traction. We already have over 2 lakh users and we have more than 2 million sessions. We have about 20 shorts, web series and shows on the platform. But the good thing about this is that, on one hand, the content is very reasonably priced in terms of our cost, and on the other hand, the way we're looking at it is for stickiness on our current platform, on our current Dish TV and d2h subscribers. So from a cost point of view, we do not see them galloping as we move forward. The investments, I think we are looking at a model where sooner rather than later, it starts paying back for itself. So that's where we stand, Yogesh.
So the investments, I was referring to the recurring content investments. I mean what is the annual expense that you are targeting towards new content or original content?
Yes. So as I was saying that if you look at the nature of our content, it's user-generated content, it is short-form videos. So this content is relatively very less expensive. And we have lots of retention activities on the platform in any case. So a lot of the spend is substitutional in nature. Because we do lots of retention initiatives now it just becomes one of them. So it will not be right for me to segregate this because that may be seen as an incremental spend. Part of it will be substitutional spend. But as I said, increasingly we're looking at it getting into a kind of self-financing model. Maybe we'll be able to throw more light because it's just started in the coming earnings calls.
The next question is from the line of Sangam Iyer from Consilium Investment Management.
Jawaharji, just wanted to check with you, the content cost incrementally going forward in FY '20, would it be more pro rata based on the a-la-carte that the subscriber chooses? Or is it again going to be more like a non-negotiated amount over a period of a year or 2?
No. That's actually because we are operating on a commission basis. So that's why the content cost, I believe, should be a pass-through item to the broadcaster. We are not yet -- and the difference in the pricing for consumer is and for us on a-la-carte is different and for in packages is different. Now we rely and we have communicated to the broadcaster that make 16, 17, 15 packages. And there are some -- half of them are not popular at all. Our consumers don't pick up. So we have requested them to remove those packages and relook at that. It is a new learning for the broadcaster and for the DPO. I can say that we are working hand-in-hand so that how to grow the revenue, working as marketing leader and [indiscernible]. So for broadcaster, they have been living for sort of so many decades like on an extortion model. Now they have to hook on the marketing model and partnership model. So total mindset has to change, it is taking a little more time.
Right. So when we look at last year's INR 2,275 crores of content cost, it would also include the cost being paid for a bouquet of channels, which are not subscribed to a large extent. Now under this new regime, those channels, as you rightly pointed out, would actually be rather than a cost center be a revenue condition factor for you because as you can -- as you say, channel enhancement, et cetera. Am I looking at the right way for those channels which are not much favored by the customers here?
I think what you can safely take -- well, we have to calculate that if the content cost is in the March -- month of March maybe INR 200 -- little less than INR 200 crores, INR 190 crores or INR 180 crores. If you calculate INR 2,200 crores divided by 12. So we should aim it to take it to like 25%, 30% gross margin from that -- on that amount.
And this is based on the old reporting standard?
So if they are selling more, the customers pick up more, we will get our share of commission. So we would like the consumer to consume more and the broadcaster to advertise their content so that we get a distribution margin.
Okay. No, because why -- because in March, your content cost was pretty high compared to the revenue generated. And as you said, because of the fact that there was a disruption or uncertainty on the tariff regime by when it would come through. So...
Because ongoing payment condition for the broadcaster and because of the disruption, we -- mostly we had agreed that we assume that the contract is extended until March on the same last payment basis. So that the number of subscriber and stabilization and the recurring charge of the subscriber packaging, et cetera, it becomes a complicated story and for them to understand and to thereby bill us and also the SMS -- the billing system to mature. So all these things, that's why we have taken a call that, "Okay, we'll pay for March schedule on the similar amount. But come down on from April, we will have a new regime working on."
So could you give us some idea in terms of what's the kind of run rate that we are looking now that we had 2 months into this new regime in April and May also for this financial year?
Now we only -- March, we know the numbers from our subscriber base. We will work out the number and then Dalmiaji will communicate with you or also have a statement in a couple of days.
Okay, sir. No issues. And sir, finally on Sri Lanka, the impairment that we took, is there any further information that you can share with us on the business in Sri Lanka? Is something wrong with the d2h business there? Or why suddenly the mismatch within your aspirational revenue and the actual revenue and hence the impairment?
Well, you see in Sri Lanka, because of the new regime has come and the -- like there is a telecom levy, which is around 27% -- 28%. And the government on top of that, they had also implemented VAT of around, 15%? -- 15%. So it means that a subscriber has to pay or we have to share 43% revenue. So this has -- this whole proposition has become unviable. And we are a 70% shareholder, the majority and also in management. So we are working with another operator over there to sort out this issue and lobby with the local regulator so that we can plan further. So when we were not growing, so obviously the auditor has to be cautious in the interest of the minority shareholder and for the sake of transparency.
Got it. So now all these issues are already factored in when you have taken this impairment. So any further incremental regulation that comes in might change, otherwise the status quo order?
We expected that this -- see, like in India, we have a VAT as well as a telecom levy. So it is a very, very -- like a same type of tax. So the telecom is also suffering on that market. But telephone has become like a necessity about the roti, kapda aur makaan, whereas television is not. Local channels over there are all free-to-air, all means A-to-Z. So then people will prefer the free-to-air and et cetera. So our numbers are not growing and we don't want to put in more money in that market.
Got it. Great. And sir, finally, given the debt levels that we have currently or net debt of INR 2,000-odd crores, based on your CapEx spend for this year, where could we exit FY '20 in terms of net debt? Some clarity, can you give us something?
Around INR 1,600 crores.
Around INR 1,600 crores?
Yes.
Okay. And what's the CapEx that's if actually near it on this?
We had around INR 850 crores this year. That was '18/'19. But this year, we can wrap up in INR 600 crores to INR 650 crores which increase your grosses.
And how much of this debt would be foreign-denominated?
No. Now the foreign-denominated debt is very low. Most of the debt is already converted into rupee. Either it was paid back or we have not availed fresh [indiscernible]. And that is why the [indiscernible] ARPU is also on slightly high side.
Okay. Got it, sir. And any outlook on or what the kind of subscriber growth that net subscriber addition that you're looking at from next quarter?
So we have a plan actually to get back to our 14 lakhs or 1.4 million kind of net adds this year. So the start has been promising and we're hoping to get there.
The next question is from the line of Rajiv Sharma from SBICAP Securities.
Just a couple of questions from my side. So now that it's almost 2 months into this new tariff regime. So what is the kind of revenue -- so is it fair to say that this one-off revenue decline, which has happened this quarter in Q4, is unlikely in Q1, given that the full tariff regime is stable now -- stabilized now in this first quarter, so the first 2 months, we are able to see that very perfectly? And second is this 15% a-la-carte and bouquet thing, which you talked about. It's already been decided by High Court. Will it be really possible for try to now go in and revisit it? Or it will be again a long-drawn legal process there? And also your thoughts around both the issues?
Well, you see, in the courts, you can always litigate. But I think previous litigant, he has already understood that it is an expensive affair. They are very much onboard. And that item is one thing, which was they said that it is without basis. This was the judgment. So the TRAI can always -- now there is experience and all these things, they can create a basis. Based on that, they come out with a short consultation and announce whether it should be 14% or 16% or 20%. Broadcaster would like to have more than maybe 35%, 40%. So we have to wait until the consultation comes out. We are -- people are ready with them, but they are not finally. Probably they were waiting for this election to complete or -- but we don't know.
And my first question please?
The revenue is much better than the fourth quarter, it is in line with Q2 and Q3 and with the World Cup coming up next month, I think, the improvement will be quite good.
Okay. And one more thing, yesterday, Sun TV, in their earnings call, were mentioning that there is a huge traction which DTH is seeing, post the Tariff Order. Could be confined to south markets, could be more TN issue but overall, they were suggesting that given that the cost for cable has gone up, DTH should benefit. But your subscriber additions this quarter plus your overall guidance of about 1.4 million isn't suggesting a similar trend or momentum. What's the disconnect there? And secondly, what are your thoughts on more consolidation in the DTH space?
On the first one, I will say that you mentioned a while back, one of you mentioned the prices at which the acquisitions are being made in south by this player, of course, at heavily discounted prices, so you can always talk of much bigger numbers with those prices. But we are definitely, when I say 1.4 million, I'm looking at the 0.7 million that we've had this year and therefore that is the minimum aspiration that we have, that we will go for 1.4 million kind of growth. But certainly, we are quite excited about the opportunities that exist at the moment, both from Free Dish platform as well as the cable. And as was just mentioned, there would be cricket season almost throughout the year and we having launched our special India Cricket service, which is finding very good favor with the customers, we feel that we should be able to do pretty well in terms of subscriber addition.
Okay. And thoughts on consolidation in the DTH space?
Well, there is always an opportunity for consolidation. So currently we cannot -- we don't have to discuss that and these things cannot be discussed on the conference calls.
So there has been news reports about Airtel and Dish TV kind of merger or takeover or those kind of things. Any thoughts around that?
Well, the management of the companies are not privy to any such things and we cannot comment on that.
The next question is from the line of Ankur Periwal from Axis Capital.
So sir, under the new regime, now since content cost which was the biggest variable part is already a pass through, this becomes a largely fixed cost oriented business and hence the commensurate of getting leverage benefits. So do you think that this can result in a quest to add more and more subscribers for the existing players, which can in turn result in a downward pressure in the NCF going ahead? Your thoughts on that, please.
There is no fix fee kind of environment, who says that?
No. So are overheads or our costs are largely fixed, while -- since content cost is all variable, so it's a pass through. So the higher the number of subscribers you add, the operating leverage clearly kicks in.
Well, that was always the case in DTH and that is why the industry used to add around 11 million, 12 million per annum, and everybody was trending for more and more number of subscribers and that is how the subsidy started. The industry, as such, is quite used to it. And moreover it will continue to be on the same line. And this question for the fixed cost that we are paying is covered by the NCF which will take care of the fixed cost plus the EBITDA margin. This content benefit that we get from 20% to 35% or maybe higher will be an additional take. If we really analyze the fixed and variable cost, we are well covered within 130 plus GST.
Okay. And sir, on the other overhead front, while there are certain taxes or incremental levies which DTH as an industry pays versus cable has not been. So one, has there been any thought with the authorities as for our representation, if there will be a level playing regime? And second, internally, the other overheads that we have, the fixed cost, do you think there is a scope for rationalization of them under the new regime?
You're discussing about the license fee?
Both the parts. So the levies that we have as a DTH industry, which is more for the industry and secondly, our own fixed cost for the company, ex the levy part wherein probably, if there's any rationalization possible there?
No, the fixed cost like transponder, salary, administration, establishment, general administration will continue to be there. And on license fee, there are some decisions going to happen either by court or by the government. We really need to wait and watch and this has been discussed in the past calls also, that what is our viewpoint on the license fee going forward.
The next question is from the line of Mayur Gathani from Ohm Portfolio.
Sir, I just wanted to check what is the free cash flow for FY '19 and for the quarter?
For the quarter, it was INR 95 crores and for the full year, it was INR 690 crores.
INR 690 crores is the free cash flow, right?
Yes.
Okay. And secondly, there was some mention of technological changes disruptions in Jan-Feb. So has that been taken care of?
Yea, it is sorted out. That's why we -- March -- the January-February issue was sorted out.
Can you just explain what could be the technology issues? I mean, I'm sure you are more prepared for this thing to happen.
Historically, the systemic legacy, which came from the d2h, the capacity of the subscriber management system was not adequate to take that kind of pressure to shift the subscribers within a very short span. So that glitches were there but our distribution system was pretty good. It was -- it did well and it was done well. So now we have migrated to the new system.
Okay. And going forward for FY '20, would you -- what would your EBITDA guidance be, EBITDA margins? Because you were guiding for 35% or so for FY '19, you are a tad below it.
So we had 33.2% this year. Definitely it will be more than 35%. Now it will also depend on how do we account for the same. Like, if it is a pass-through item, the content cost, then this 35% can also become 38% to 40% because the numerator will be less.
Right. Okay. Fine, so at least more than 35% in case everything remains the same?
Yes.
Okay. And you were giving a guidance of 1.4 million subscriber additions for the year FY '20?
Yes. Net additions.
As and when we are able to, all the DTH company are able to decide, agree on the accounting part on the content cost, we will apprise to the our analysts with a QA note or a conference call. So this is likely to be -- the discussion is at advanced state amongst all of us. It is just a matter of 2 weeks that we conclude along with the help of our auditor. So they are on job.
Okay. Would you -- I mean the reason for having lower additions for this quarter, 47,000 only, would you just leave it for the transition period or would we see some slowdown also? Because it's a very poor number.
So mostly -- because if you lose 2 months out of 3, then this is what happens. So practically, it's probably some loss in Jan-Feb and some gain in March, which works out to this 47,000. So it is largely due to that.
Okay. So it is largely due the transition only, nothing to do with -- you don't see any slowdown of pickup of set-top boxes?
No, we will see some acceleration now.
The next question is from the line of Alankar Garude from Macquarie.
More of a continuation of the previous question on EBITDA. While I understand that on margins, you said 35% and 38% -- 40% in case of that accounting change, but would it be possible to comment on the absolute EBITDA growth in FY '20? Any aspiration which you may be having?
This is the growth in turnover. It can be anywhere between INR 2,300 crores to INR 2,500 crores, but then we have to spell out the growth in the revenue figure, which we can discuss in the next call when the effect of NTO is more matured and we have digested at least 3 full months of the consumer behavior.
Understood sir. So INR 2,300 crores to INR 2,500 crores for FY '20, right?
Yes. This year, we had INR 2,044 crores, so this kind of range, we can say that it can happen.
Okay. Dalmiaji, secondly, I just needed some clarity on this impairment. So while we discussed the impairment pertaining to Lanka but this impairment of goodwill of about INR 1,500-odd crores seems to be a very high number. So can you just explain the nature of this impairment and what led to such a big impairment?
Lanka, if you remember, that we had around INR 8,000 crores of goodwill because of the merger, divided into 3, it's goodwill, brand and customer relation. Now the kind of projection which was given at the time of merger and the initiation of NTO and the change in the business scenario plus slightly lower number on a roundup turnover was responsible for impairment on account of goodwill. You see, in the former regime, before Ind AS, we used to depreciate goodwill like any other fixed asset. Now there is no normal depreciation chargeable to the goodwill. It is impaired, this is the business projection which was given and actual realized business numbers. So it will still keep on happening. This is the number shared with the auditor at the time of merger and how we are able to read those numbers. More particularly, what happened in Q4 it was much less than the number which was provided. So we could not hold and that is how the big number of INR 1,542 crores was provided as goodwill.It will have 2 positive impacts: One is that we will not be paying MAT because of the charge of goodwill; and secondly, it will strengthen our fees in income tax on full tax also but because it was charged in the books of account, we can take shelter that on a full income tax charge also, we are not liable to pay on the income that is generated as per the income tax.
Okay, sir. And this will be done at the end of every quarter or just the end of the fiscal year?
Like -- as per law it has to be at the end of every quarter but because of the volatility in our business, auditor is also of the opinion that we could see at the end of the year about the consolidated number, actual achievement versus the planned number at the time of merger.
Okay, sir. And given that we had the NTO in this year, the impact of the NTO, should we expect this impairment number to be significantly lower from next year onwards?
That is what we are hoping. Rather some of the guide in our own company says that it can be reversed also if the add number or the achieved number is much more than the planned number but we really need to see the full year number before we can comment on the same.
Understood, sir. And last question from my side for Jawaharji. While I understand we can't really comment on the speculation in the media about any merger of Airtel and Dish TV, but just wanted some thoughts from your end regarding, if any merger, whether it involves us or not, can there be any benefit to the incumbents? And if at all yes, then what can be the possible synergies which can come out of such a merger?
Actually, it is the same question with different words. The reply will remain the same.
The next question is from the line of Aasim Bharde from IDFC.
I have just 1 question. If you could just tell me the reason behind your trade payable figure doubling in FY '19? What constitutes these payables and why have they doubled?
No, because of the confusion created by NTO about the payment of content, it was not decided, I would say, till 31st of March but now it has been cleared and it has been normalized in the month of April and also in the month of May.
Okay. So it pertains mostly to content payments only, right?
Yes, yes. And that was also because of the confusion created by the transition period between the normal that we use to book and the NTO regime.
The next question is from the line of Rishabh Chudgar from Enam Holdings.
I just had one bookkeeping question. Can you tell me what is the liability which is related to the license fee?
At the end of 31st March, it is INR 3,200 crores out of which, the interest is INR 1,150 crores.
The next question is from the line of Sanjay Chawla from JM Financial.
My question is on content cost. It's in 2 parts. First is, you mentioned that until March -- up until March, you have booked the content cost based on the older contracts. So is there a possibility that this could be revised upward for the fourth quarter when you sit down for reconciliation as per the NTO?
No. This was anticipated by us also, but in the month of April, it was all finalized. And the figure provided by us in the account is correct and it has been duly confirmed by the relevant broadcaster also.
Actually, the whole industry has decided in a similar fashion, so that's why we had taken the call.
Okay. And the second part of this, I just wanted to confirm, did you mention that we could expect the growth of 25% to 30% in the content cost in fiscal '20 Y-o-Y?
Well, it is linked to the commission. So if the margin goes up, if the consumer does more consumption and more sale happens, we will get extra margin.
And that is good for the company now because content is coming to us as a commission for more we sell more we get.
So I'm just trying to reconcile the margin expectation of 35%-plus compared to 30% that we reported in the fourth quarter because it seems that your content cost to subscription revenue ratio is going to go up under the post-NTO in the NTO regime. It's already at probably in the low 40s. It just seems that it is probably going to go to 45%, 46%, 48%. I am just trying to understand how do we reconcile the margin expansion, which is expected in fiscal '20, 35%-plus, with the fact that content cost as a percentage of subscription revenue will rise significantly.
Why content is a big question, because if you multiply the number of subscribers, which is 23.7 million x INR 130 that itself is a big number to take care of all the fees expenses. And the commission that we did out of content is an additional amount which will directly flow to the EBITDA as per our calculation, which is INR 2,300 crores, INR 2,500 crores. This is the first 2 months of our operation under the new regime. So we are very confident that margin will increase to 35% and also -- of course if you're adopting the new accounting methodology then it can be 38% to 40%.
Earlier our sales growth on the revenue used to be either we increase the package price or we do additional sales, right? Now we will be getting revenue from the sales, additional subscriber as well as the more consumption by the consumer. And the broadcaster when they start doing marketing of their content, so the consumer takes INR 19 channel, so obviously we will retain 35%, 40% as we agreed with the respective broadcaster. That's one agreement. And secondly, as a pass-through revenue, our cost -- our license fees also go down. So it is a multi-pronged benefit where we actually have to go in a different model now, remodeling of our business.
Sir, where I am coming from is that there seems to be -- now I understand this INR 130 network carriage fee or NCF, which should be margin accretive, but where I'm coming from is that there seems to be implicit discounting in your packs on the NCF. For example, I'm just taking the base pack of INR 213 inclusive of tax and ARPU on that is INR 180 or so excluding tax. But the underlying content cost here is INR 135. So there is...
Yes. The fourth quarter or previous quarter was different. Now in the NTO regime we have to count the subscriber number 4 times a month. So this means the suspended subscriber, they will get equated-- we will have some upside like on an average we have a loss of billing of around 15%. Now it will come down because we will be taking readings 4 times a month and communicating to the broadcaster. That's one part. Second part, the...
Sir, can I just talk about this particular pack, in which INR 180, you're getting ARPU but the content cost on INR 135, now even if you pay 65% of that to the broadcaster...
Yes, [indiscernible] our initial discount to probably is that there is a less disturbance to the consumer. But gradually, this discount will go away. Plus we have added some channels, which is costing us a very small amount from the broadcaster. They were part of our DD Free Dish. So these are the petty expense which we had taken a conscious call that from NPR we will provide them. I cannot explain to you over the phone call..
Do we expect the pack prices to basically go up so that the NCF gets closer to INR 130 compared to the discounting that we are seeing currently in you DPO packs?
Yes. We will continue that way but you see, you have to understand the broadcaster. Earlier, we used to get the content and we used to give to the consumer in the same fashion. Ad has been forced by the content provider because of their competitive scenario between themselves and competitive scenario at our end. But now you will find a broadcaster that their reach has come down drastically for one channel and/or a different broadcaster. So they are doing resetting that how they want to do the pricing. And I'm sure they are clever enough to understand this whole new regime and based on that, they will very soon, come out with a new pricing.
So do you expect some upside in terms of the carriage and placement and marketing fee? Because obviously, broadcasters want to improve their reach, so instead of maybe lowering the channel price, maybe they can give -- is that -- do you see a significant scope there on the carriage and placement front?
You see, we cannot discuss this on the conference call because we had told the broadcasters to come sit with us, take the call center and do the upsell to our consumer. There is a regime of -- by TRAI, you cannot have a discrimination. But DTH companies have both call center and a whole lot of expenses, which a MSO don't have. They had outsourced to their LCO. So they are operating different regime. So that's -- I cannot explain to you how it is going to impact on the conference call but definitely, as we decide how we are going to do accounting, so I'm sure Tarun will discuss with you some new model. Based on that you can build your modeling on the company. But -- or you do that what are the sales collection and the EBITDA. So how are we going that reveals, per subscriber what is our profit.
Sure. I'll discuss that separately. Just a last question. As things stand today in terms of the base prices that you have for your entry level prices on the DPO packs that you have, and also the kind of selection that you're seeing from the a-la-carte customers, who are choosing their own packs, between the two as things stand today, which one is actually generating better gross margin for you in terms of revenue minus the content cost per customer basis, which seems to be more profitable for you in terms of contribution?
I think it is a changing scenario, it keeps on changing. I see that -- If I say that it is the same scenario but we may see the trend differently next month. So we have to wait for it. Let's see that what the broadcasters offer, unless they start doing marketing and start communicating to their consumers. See, one learning we had in this whole of MTRO, that the broadcaster was the holy cow before the consumers and we as a DPO were the bad boys because we were collecting or there were complaints on the service and et cetera. Now they realized that we had put their price on the EPG. Now the consumer has realized that there is a -- the DPO are not the culprit, it is the broadcaster and let the broadcaster have a communication with their consumer and we are just a hawker.
Ladies and gentlemen, we will take our last question for today that is from the line of Mayur Gathani from Ohm Portfolio.
Your gross net debt is INR 2,000 crores and your free cash flow for this year was INR 700 crores. I'm assuming you will have a much better cash flow for FY '20. Why is the net debt at INR 1600 crores in FY '20 end? It should -- shouldn't we reduce it further?
Yes. Because of the operation of NTO, we are also in a watch mode that how the cash flow is likely to emerge. And that is why we are taking a conservative figure of INR 1600 crores. If you strictly ask about the scenario, it can be INR 1,350 crores to 1,400 crores also. That is the, I would say, last 2 months of operation but we have to really see at least 6 months that how it unfolds under the [Technical Difficulty]
Hello?
Yes, could you hear that?
My further question is -- by all means, your cash flow will definitely be way better if we understand how this NTO regime runs. I mean, you might be conservative to say the INR 1600 crores but I'm sure it has to be way more -- the debt can be reduced way further as such. And your CapEx is also lower.
I cannot say below INR 1,500 crores because there's a lot of uncertainty due to NTO. Maybe as we go forward in the first call, second call, it will be clear that what is the likely scenario in terms of the net debt.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Tarun Nanda for closing comments. Thank you and over to you, sir.
Thank you once again for joining us, ladies and gentlemen. We soon hope to have the transcript of this call uploaded on our website, www.dishtv.in. We look forward to speak to you again at the end of the first quarter of fiscal 2020 or even earlier on a one-on-one basis. Thank you, and have a great day.
Thank you very much. Ladies and gentlemen, on behalf of Dish TV India Limited, that concludes today's conference. Thank you all for joining us and you may now disconnect your lines.