14 December 2017

Annual Report Threadbare

DISH TV FY17 The ART of annual report analysis
Dish TV’s (DITV) FY17 annual report highlights a year of weak operating  Declining ARPU (at
performance wherein (a) monthly ARPU declined to INR154 (FY16: INR154) and rising
INR162), (b) EBITDA margin declined 290bp to 32.5% on rising operating cost dented
programming and call center charges, and (c) churn rates increased to EBITDA margins to 33%
10.5% (FY16: 8.3%). FCF post interest adjusted for increase in creditors for (FY16: 35%)
capex and regulatory dues (which we consider as quasi debt) remained
 Rising subscriber churn led to higher
negative at INR4.1b (FY16: - veINR2.5b) due to high capex of INR8.6b
maintenance and thereby subdued OCF at
(FY16: INR9.0b). Of the total capex, INR4.4b pertains to maintenance of
INR0.2b (FY16: 2.7b).
the pre-existing net subscriber base and should (in our view) be adjusted
through operating cash flows. Net debt (adjusted) increased to INR25.2b  DTA recognized at INR5.1b stood high at
(FY16: INR21.9b). DITV continued to recognize DTA at INR0.7b (FY16: 1x of NW
INR4.4b), cumulative DTA stood high at INR5.1b (1x of NW). Contingent
liabilities increased to INR2.9b, 59% of NW (FY16: INR2.5b) primarily on
account of disputes pertaining to entertainment tax and indirect taxes. Stock Info
Our analysis of DITV and VDTH (Videocon DTH) concluded with merged Bloomberg DITV IN
entity may have a high adjusted debt of INR58.1b with Debt-EBITDA ratio Equity Shares (m) 1065.9
(adjusted) of 2.9x and finance cost of 11%. 52-Week Range (INR) 111/68
 Declining ARPU, increasing operating cost dent EBITDA: ARPU 1, 6, 12 Rel. Per (%) 2/-8/-32
declined to a 5-year low of INR154/ month (FY16: INR162/ M.Cap. (INR b) /(USD b) 85.8/1.3
Avg Val, INRm 431
month) and led to tepid revenue growth of 4% to INR30.1b.
Free float (%) 35.6
While subscription revenue grew of 1% to INR18.1b, infra
support services revenue grew 10% to INR9.6b. Higher Shareholding pattern (%)
operating cost – primarily programming cost and call center Sep-17 Jun-17 Sep-16
charges – led to a 290bp decline in EBITDA margin to 32.5%. Promoter 64.4 64.4 64.4
Programming cost increased 7% to INR9.2b (FY16: INR8.6b). DII 7.8 8.2 6.8
EBITDA declined 4% to INR9.8b. FII 18.8 17.3 19.8
 Rising churn leads to higher maintenance capex: Subscriber Others 8.9 10.1 9.0
churn continued to increase and stood at 1.6m (10.5% of Note: FII Includes depository receipts
average net subscribers) v/s 1.1m in FY16 (8.3% of average net
Stock Performance (1-year)
subscribers), leading to higher capex being utilized to maintain
the pre-existing level of subscribers. DITV has capitalized
INR7.4b of CPE for gross subscriber addition of 2.7m; of this,
only 41% capex pertained to net subscriber addition and 59%
was utilized to replenish dormant subscribers.
 OCF declines; FCF remains negative: Operating cash flow post
interest adjusted for (a) increase in regulatory dues by INR2b,
(b) creditors for capex by INR1b, (c) maintenance capex at
INR4.4b, and (d) loan repayments from RPT (FY17: Nil v/s
INR1.3b in FY16) declined to INR0.2b (FY16: INR2.7b). FCF post
interest (adjusted) remained negative at INR4.1b (FY16: -ve Auditor’s name
INR2.5b). Net debt (adjusted) increased to INR25.2b (FY16: Walker Chandiok & Co. LLP
INR21.9b), with borrowing cost increasing to 9% (FY16: 8%).
 Merged entity with VDTH to have high debt; cost synergy Sandeep Ashok Gupta
(S.Gupta@MotilalOswal.com); +91 22 39825544
remains monitorable: Adjusted debt for the merged entity
stands at INR58.1b, implying a Debt/EBITDA of 2.9x Mohit Baheti
(considering similar level of EBITDA). VDTH has high content (Mohit.Baheti@MotilalOswal.com); +91 22 3010 2492
cost per subscriber at INR82/month (v/s DITV at INR51/month)
Somil Shah
and borrowing cost of 13% (v/s DITV at 8%). Synergizing of
(Somil.Shah@MotilalOswal.com); +91 22 3312 4975
content and finance cost remains a key monitorable.

Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.mtilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 ART | Dish TV FY17

Higher operating costs dent EBITDA

 DITV’s consolidated revenue (net of entertainment tax) grew subdued by 4% to
INR30.1b (FY16: INR28.9b) due to lower ARPU of INR154 (FY16: INR162), despite
7% growth in subscriber base to 15.5m (FY16: 14.5m).
 While subscription revenue grew marginally by 1% to INR18.1b, infra support
services revenue grew 10% to INR9.6b.
 EBITDA margin declined 290bp to 32.5% (FY16: 35.4%), as operational expenses
Rising programming costs
increased by 8% to INR14.3b (48% of the revenue) from INR13.2b (46% of
and call centre charges dent
EBITDA revenue) in FY16. This was primarily because of increase in programming costs
and call center charges.
 Programming cost increased 7% to INR9.2b (FY16: INR8.6b). Call center charges
increased 46% to INR0.9b (FY16: INR0.6b). License fees remained flat at
INR21.7b.
 Also, one-time transponder cost charges by ISRO at INR0.3b and forex loss at
INR0.1b led to increase in other expenses.

Exhibit 1: Rising operating costs dent EBITDA (INR b)

Consolidated (Reported) Consolidated (Adjusted to Ent Tax)
Particulars FY16 % FY17 % FY16 % FY17 %
Net Revenue (Operations) 30.6 100 30.1 100 28.9 100 30.1 100
Operational Expenses 14.8 48 14.3 48 13.2 46 14.3 48
Administrative and Other Expenses 4.3 14 4.6 15 4.3 15 4.6 14
Personnel Cost 1.2 4 1.4 5 1.2 4 1.4 5
EBITDA 10.2 33 9.8 32 10.2 35 9.8 33
Source: Company Annual Report, MOSL

Exhibit 2: Infra support services boot operating revenue (INR b)

Particulars FY16 (reported) FY16* FY17
Subscription revenue 19.6 17.9 18.1
Infra support services 8.7 8.7 9.6
Lease rentals 0.4 0.4 0.1
Others 1.9 1.9 2.3
Total 30.6 28.9 30.1
Note: * - Net of entertainment tax Source: Company Annual Report, MOSL

Exhibit 3: Increase in programming cost (INR b)

Particulars FY16 FY17
Programming cost 8.6 9.2
Programming cost as % of subscription revenue 48.0% 54.1%
Programming cost as % of total revenue 29.8% 30.6%
Source: Company Annual Report, MOSL

Subscriber addition growth tepid; ARPU at 5-year low

ARPU stood low at INR154
(FY16: INR162); lowest over
last 5 years
 DITV’s net subscriber base grew slower at 7% to 15.5m (FY16: 14.5m, growth
rate 12%) despite the government’s digitization push. We believe this is
primarily due to rising competition from Free Dish, which now includes many
free prominent channels and cable services.
 ARPU declined to a 5-year low of INR154 (FY16: INR162). This is primary on
account of (a) demonetization impacting consumer behavior, especially in DAS-

14 December 2017 2
 ART | Dish TV FY17

III and DAS-IV areas, (b) downgrading by some HD subscribers to standard

definition, and (c) downward pull effect of cheaper subscription packages of
INR99 and Zing.
 DITV has the lowest ARPU among peers. According to management, this is not
only because of the difference in the churn definition, but also as it calculates
ARPU only on subscription revenues (excluding other revenue), which are
considered net of commission and service/entertainment tax.
 We note that while DITV’s ARPU has declined during the year, some of the peers
have reported flat-to-higher ARPU.

Exhibit 4: Tepid increase in subscriber base Exhibit 5: Low ARPU makes subscription revenue subdued
Net Subscribers (m) Net Subscribers (m) growth Subscription revenue (INRb) ARPU

13.4% 172.0
11.5% 12.0%
163.0 162.0
6.2% 6.7% 157.4
154.1

10.7 11.4 12.9 14.5 15.5 19.2 22.7 24.5 26.6 27.7

FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17

Source: Company Annual Report, MOSL Source: Company Annual Report, MOSL

Exhibit 6: Dish TV’s ARPU remains lowest among peers (INR)

Reported ARPUs FY13 FY14 FY15 FY16 FY17
-Dish TV 157 165 172 162 154
-Videocon d2h 150 181 196 207 207
-Airtel Digital 177 202 216 223 233
Source: Company Annual Report, MOSL

Increase in subscriber churn leading to higher maintenance capex

 Subscriber churn continued to increase and stood at 1.6m (FY16: 1.1m); churn
as a percentage of average net subscribers increased to 10.5% (FY16: 8.3%).
 We believe higher subscriber churn leads to additional capex requirement to
maintain pre-existing level of subscriber base.
 DITV capitalizes customer premises equipment (CPE) including viewing card
Rising subscriber churn led upon activation of services. It has capitalized INR7.4b of CPE for gross 2.7m
to higher maintenance
subscriber addition. In our view, this would mean INR3b has been incurred for
capex (48% of total capex)
growth capex (for addition of net 1.1m subscribers) and INR4.4b for
maintenance capex (for replacement of 1.6m churned subscribers).
 We also note that maintenance capex pertaining to churned out subscribers has
been increasing and stood at 48% of total capitalization over FY13-17.

14 December 2017 3
 ART | Dish TV FY17

Exhibit 7: Rising subscriber churn over past few years (m)

Particulars FY13 FY14 FY15 FY16 FY17
Gross subscribers 15.2 16.6 19.1 21.8 24.4
Dormant Subscribers 4.5 5.2 6.2 7.3 8.9
Net Subscribers 10.7 11.4 12.9 14.5 15.5
Subscribers churn 1.2 0.8 0.9 1.1 1.6
Average Subscribers churn
11.7 6.9 7.6 8.3 10.5
(% of Net Subscribers)
Source: Company Annual Report, MOSL

Exhibit 8: Rising churn leading to rising maintenance capex of CPE (INR b)

Maintenance capex Growth capex Maintenance capex % of total capex

80%
59%
52% 53%
60%
42%
38% 3.0
5.2 40%
2.9
2.4 4.4
4.4 20%
3.2 3.8
2.7 2.7
0%
FY13 FY14 FY15 FY16 FY17
Source: Company Annual Report, MOSL

PAT declines, though supported by DTA recognition

 Weak operating performance coupled with rising depreciation cost led to a
560bp decline in PBT margin to 4.4%. PBT declined to INR1.3b (FY16: INR2.9b).
 PAT was lower at INR1.1b in FY17 than INR6.9b in FY16 due to higher
recognition of DTA of past few years cumulatively in FY16. DITV recognized
INR0.7b of deferred tax asset (DTA) in FY17 as against INR4.4b in FY16.
 Through lower recognition of DTA, it supported PAT by lowering tax expense to
INR0.2b.

Exhibit 9: Deferred tax recognition continues to support PAT (INR b)

Consolidated (Adjusted to Ent Tax)
Particulars FY16 % FY17 %
EBITDA 10.2 35 9.8 32
Depreciation 5.9 20 6.6 22
EBIT 4.3 15 3.2 10
DTA recognition at INR0.7b Financial Charges 2.1 7 2.2 7
(at 54% of PBT) continued EBT 2.3 8 0.9 3
to aid PAT to INR1.1b Other Income 0.6 2 0.5 2
PBT (Before Exceptional Items) 2.9 10 1.4 5
Exceptional Items/Prior period - - (0.1) (0)
PBT 2.9 10 1.3 5
Current Tax 0.3 1 1.0 3
Deferred Tax (4.4) (15) (0.7) (2)
Income Tax - prior years - - (0.1) (0)
PAT 6.9 24 1.1 4
Source: Company Annual Report, MOSL

14 December 2017 4
 ART | Dish TV FY17

DTA stands high at 1x of net worth…

 DITV recognized deferred tax assets of INR4.4b in FY16, of which INR3.9b (89%
of total DTA) was recognized in subsidiary Dish Infra Services, which commenced
operations in FY16 subsequent to transfer of infra support business by DITV.
 Further, in FY17 DITV recognized DTA of INR0.7b in its subsidiary – Dish Infra
Services.
 Of the total DTA recognized till FY17 at INR5.1b (1x of NW), 90% is recognized in
Dish Infra. Pre-tax loss of Dish Infra Services was INR0.8b (FY16: loss of INR0.6b).

Exhibit 10: Net worth supported by DTA recognition (INR b)

Cumulative DTA recognized Particulars Dish TV - Standalone Dish Infra Services - Subsidiary Dish TV - Consolidated
DTA 0.5 4.6 5.1
over past few years stood
DTA times of NW 0.2x 1.1x 1.0x
high at 1x of Net worth. NW 2.7 4.0 4.9
Source: Company Annual Report, MOSL

Exhibit 11: Widening losses in Dish Infra Services (INR b)

Particulars FY16 FY17
Net Revenue (Operations) 10.4 11.3
Operating and Administrative Expenses 3.9 4.2
Personnel Cost 0.7 0.9
EBITDA 5.8 6.1
Depreciation 5.3 5.8
Dish Infra services, wherein EBIT 0.6 0.3
Financial Charges 1.2 1.2
DTA of INR4.6b has been
EBT (0.7) (0.9)
recognized continued to Other Income 0.1 0.1
incur losses. PBT (0.6) (0.8)
Current Tax 0.3 0.1
Deferred Tax (3.9) (0.7)
PAT 3.0 (0.2)
Source: Company Annual Report, MOSL

High capital intensity keeps FCF negative…

 Reported operating cash flow declined to INR8.2b (FY16: INR11.3b) primarily
due to subdued operating performance.
 Increasing regulatory dues have been supporting operating cash flow and free
cash flow. Over FY13-17, DITV paid INR3.4b finance charges against INR7.6b
interest expense recognized in the income statement.
 DITV capitalized INR7.4b of customer premises equipment; of this, INR4.4b (59%
of the capex) was utilized to replenish dormant subscriber and maintain existing
level of subscriber base, and hence, adjusted to operating cash flows.
 Trade payable in working capital changes also includes creditors for capex,
which positively contribute to cash flows by INR1b (FY16: INR1.4b).
 During FY16, loans to related party of INR1.3b were received back (which has
been considered as part of working capital by the company).
 Adjusted for the above, adjusted operating cash flow was minimal at INR0.2b
(FY16: INR2.7b) and free cash flow was a negative INR4.1b (FY16: -ve INR2.5b).
 Further, adjusted FCF generation has remained tepid at –ve INR10.3b over FY13-
17 on account of high capex related to CPEs.

14 December 2017 5
 ART | Dish TV FY17

Exhibit 12: Non-core activities adding up operating cash flows (INR b)

Particulars FY13 FY14 FY15 FY16 FY17
PBT (0.7) (1.6) 0.1 2.9 1.3
Add: Depreciation 6.4 6.0 6.1 5.9 6.6
Add: Interest expenses 1.1 1.1 1.5 1.9 2.0
Add/Less: Other non-cash/operating
(1.2) (0.4) (0.4) (0.3) (0.4)
adjustments
Less: Direct Taxes (paid)/refunded (0.1) (0.1) (0.1) (0.2) (1.2)
Operating profit before working capital
5.6 5.1 7.3 10.1 8.4
changes
Inventories (0.0) 0.0 (0.0) (0.0) (0.0)
Adjusted OCF stood low at Trade receivables (0.0) (0.1) (0.2) (0.2) (0.3)
INR0.2b (FY16: INR2.7b) Loans and advances (1.4) 1.3 (0.4) 0.6 (0.6)
due to rising capital
Trade payables and Other liabilities 2.0 0.7 1.0 0.8 0.7
intensity, capital creditor Reported cash generated from operations
and maintenance capex 6.1 7.1 7.7 11.3 8.2
after tax
Adjustments:
Loans to RPT 1.0 0.7 (0.4) (1.3) 0.0
Regulatory dues (1.6) (1.8) (2.1) (1.4) (2.0)
Maintenance capex (Churned subscriber) (3.2) (2.7) (2.7) (3.8) (4.4)
Creditor for capex (1.0) 1.2 (1.3) (1.4) (1.0)
Adjusted cash generated from operations
after Tax 1.3 4.4 1.1 3.4 0.8
Less: Financial cost paid (0.7) (0.6) (0.8) (0.7) (0.7)
Adjusted Cash flow from operations post
Interest 0.6 3.8 0.3 2.7 0.2
Less: Capital expenditure (Adjusted to
maintenance capex) (3.8) (0.3) (4.4) (5.2) (4.2)
Free cash flows (Adjusted) (3.2) 3.5 (4.1) (2.5) (4.1)
Source: Company Annual Report, MOSL

Exhibit 13: Creditors for capex supporting increase in trade payables (INR b)
Particulars FY13 FY14 FY15 FY16 FY17
Trade payable cash flow movement 1.3 (0.8) (0.1) 1.0 (0.6)
Creditor for capex cash flow movement 1.0 (1.2) 1.3 1.4 1.0
Others (0.4) 2.7 (0.2) (1.7) 0.3
Total Trade payable cash flow movement 2.0 0.7 1.0 0.8 0.7
Source: Company Annual Report, MOSL

…leading to continued high leverage over the years

 Negative FCF generation has led to increase in the reported net debt from
INR6.6b in FY16 to INR6.9b in FY17.
 Regulatory dues on disputed licensing fee (which we considered as quasi debt)
increased to INR13.9b (FY16: INR11.9b). Further, creditors for capex increased
from INR3.4b in FY16 to INR4.4b in FY17.
 Adjusted for the above, net debt increased from INR21.9b in FY16 to INR25.2b in
FY17. Further, average borrowing cost increased from 8.4% to 9% in FY17

14 December 2017 6
 ART | Dish TV FY17

Exhibit 14: Negative FCF generation leading to rising net debt

Particulars FY13 FY14 FY15 FY16 FY17
Borrowings 16.3 14.1 14.8 12.3 11.4
Negative FCF generation led Less: Cash and cash equivalents 3.6 3.4 4.3 3.4 2.9
to rising adjusted net debt Less: Non-current and current Investments 2.8 2.0 2.0 2.3 1.6
at INR25.2b (FY16: Net debt 9.9 8.7 8.6 6.6 6.9
INR21.9b) Add: Regulatory dues 6.5 8.4 10.5 11.9 14.0
Add: Creditor for capex 1.8 0.6 2.0 3.4 4.4
Adjusted Net Debt 18.3 17.7 21.0 21.9 25.2
Source: Company Annual Report, MOSL

Exhibit 15: Regulatory dues continue to rise (INR b)… Exhibit 16: …leading to bulging borrowings (INR b)

Regulatory dues Incremenntal dues Borrowings Regulatory dues

Creditors for capex Finance cost (%)
14.0
2.1 9.0%
8.4%
1.4 7.3%
2.1 6.2% 5.9%
6.5 2.0 3.4 4.4
1.8 1.8 0.6
1.6 11.9 6.5 8.4 10.5 11.9 14.0

4.9 16.3 14.1 14.8 12.3 11.4

FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17
Source: Company Annual Report, MOSL Source: Company Annual Report, MOSL

High capex of CPEs funded by operating cash flow

 Over FY13-17, operating cash flow (adjusted for regulatory dues) contributed
71% of funds, while unpaid regulatory dues contributed 21%. Funding of high
capex (primarily CPEs) utilized 78% of funds and 12% of funds were used to
repay borrowings.

Exhibit 17: CFO primary source of funds Exhibit 18: Funds primarily utilized for capex
Sources of funds FY13-17 Application of funds FY13-17

3%
0%
5% 1% Adjusted Operating Cash Flow 8% 2% Capex
Unpaid License Fees 12% Repayment of Borrowings
21%
Other income Interest
Fixed Deposits Cash

71% Sale of Investments Loans and Advances

78%

Source: Company Annual Report, MOSL Source: Company Annual Report, MOSL

14 December 2017 7
 ART | Dish TV FY17

Related-party transactions remain high

 DITV’s related-party transactions remained high at INR3.1b (63% of NW) and at
INR4.7b (1.2x of NW) for FY16, which majorly includes recurring purchase of
services from Zee Entertainment Enterprises towards purchase of content.

Exhibit 19: Related party purchases continue (INR b)

Particulars FY16 FY17
Income Received
Revenue from operations and other income 0.3 0.3
Interest received 0.1 -
Purchases of services (at Reimbursement of expenses 0.1 0.1
INR2.6b) from group Expense Paid
companies Purchase of goods and services 2.7 2.6
Rent paid 0.0 0.0
Others
Short-term loans and advances 0.2 0.1
Refunds received against short-term loans and advances 1.4 0.0
4.7 3.1
Source: Company Annual Report, MOSL

Contingent liability rises on account of statutory dues

 DITV’s contingent liabilities increased from INR2.5b in FY16 to INR2.9b in FY17,
primarily on account of a significant rise in claims for entertainment tax and
sales tax & VAT (which increased from INR1.1b in FY16 to INR1.4b in FY17 and
INR0.5b in FY16 to INR0.7b in FY17, respectively).
Exhibit 20: Significant increase in contingent liabilities (INR b)
Contingent Liabilities FY13 FY14 FY15 FY16 FY17
Entertainment tax 0.1 0.1 0.2 1.1 1.4
Service tax 0.6 0.6 0.7 0.7 0.7
Sales tax and Value Added tax 0.1 0.2 0.2 0.5 0.7
Others 0.4 0.1 0.2 0.2 0.1
Total 1.2 1.0 1.3 2.5 2.9
Source: Company Annual Report, MOSL

DITV-VDTH merger: Lower content cost for DITV can help create synergies
 EBITDA margin for VDTH (Videocon DTH) was 32.8% (INR10.1b), similar to DITV’s
EBITDA margin of 32.4% (INR9.8b).
 In FY17, content cost per subscriber for VDTH was high at INR82 (v/s INR51 for
EBITDA margins at 32%
DITV); however, DITV’s license fee stood higher at 7.2% of revenue (FY16: 7.1%)
similar for both companies;
as compared to 5.6% of revenue (FY16: 11.8%) for VDTH.
 DITV is more conservative while accruing disputed license fees, known
regulatory dues and interest on those dues as expenses and corresponding debt;
VDTH treats regulatory dues as contingent liability and provides no guidance on
interest on regulatory dues.
 License fees as per the court order are calculated at 10% of adjusted gross
revenue. We believe that though we can calculate license fees as % of total
revenue, the sharp decline in VDTH’s license fees from 11.8% to 5.6% remains a
key observable.

14 December 2017 8
 ART | Dish TV FY17

 Adjusted for disputed license fees treated as contingent by VDTH, EBITDA stood
at INR8.7b (margin of 28.8%).
 We note that content cost for DITV may be lower due to synergy benefit of
Lower content cost for DITV
may drive cost synergies for
group business (Zee Entertainment) and the merged entity would continue to
merged entity reap the benefit.
 Also, increased subscriber base of merged entity at ~27.6m net subscribers (as
of September 2016) may drive synergy benefits in terms of lower content cost,
thereby providing a stimulus to EBITDA margin.

Exhibit 21: EBITDA margins for merged entity may remain similar (INR b)
DISH TV (DITV) VIDEOCON D2H (VDTH) Merged Entity
Particulars FY16 % FY17 % FY16 % FY17 % FY17 %
Net Revenue (Operations) 28.9 100 30.1 100 28.4 100 30.6 100 60.8 100
Operational Expenses 13.2 46 14.3 48 16.5 58 16.2 53 30.5 50
Administrative and Other Expenses 4.3 15 4.6 15 2.8 10 3.1 10 7.7 13
Personnel Cost 1.2 4 1.4 5 1.2 4 1.3 4 2.7 4
EBITDA 10.2 33 9.8 32 7.8 28 10.1 33 19.8 33
Depreciation 5.9 19 6.6 22 6.1 21 6.9 22 13.5 22
EBIT 4.3 14 3.2 10 1.7 6 3.2 10 6.3 10
Financial Charges 2.1 7 2.2 7 3.1 11 2.8 9 5.1 8
EBT 2.3 7 0.9 3 (1.4) (5) 0.4 1 1.3 2
Other Income 0.6 2 0.5 2 0.0 0 0.1 0 0.5 1
PBT (Before Exceptional Items) 2.9 9 1.4 5 (1.4) (5) 0.4 1 1.8 3
Share of Profit from Jointly Controlled Entity (net of tax) - - - - - - - - - -
Exceptional Items/Prior period - - (0.1) (0) - - - - (0.1) (0)
PBT 2.9 9 1.3 4 (1.4) (5) 0.4 1 1.8 3
Tax (4.0) (13) 0.2 1 - - - - 0.2 0
PAT 6.9 23 1.1 4 (1.4) (5) 0.4 1 1.5 3
Source: Company Annual Report, MOSL

Exhibit 22: Higher content cost offset by (INR b)… Exhibit 23: …lower license fees (INR b)
DITV VDTH DITV VDTH
Particulars Particulars
FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17
Programming and content costs 8.5 9.2 10.8 12.3 License fees 2.2 2.2 3.4 1.7
As % of rev 28.0% 30.4% 38.0% 40.0% As % of rev 7.1% 7.2% 11.8% 5.6%
Content cost/net sub 52 51 82 82 License fees/net sub 13 12 25 12
Source: Company Annual Report, MOSL Source: Company Annual Report, MOSL

Debt/EBITDA remains similar; finance cost higher for VDTH

 Debt adjusted for regulatory dues stood at INR29.8b for DITV as compared to
INR28.3b for VDTH. Debt/EBITDA was similar at 3x for DITV and 2.8x for VDTH.
 Finance cost without considering interest on regulatory dues (accrued, but not
paid) for VDTH stood higher at 13% as compared to 8% for DITV; this would lead
to increased finance cost for the merged entity. However, refinancing of debt
may lead to synergy gains.

14 December 2017 9
 ART | Dish TV FY17

Exhibit 24: Debt-EBIDTA remains similar Exhibit 25: Finance cost may increase
Particulars DITV VDTH Merged Entity Particulars DITV VDTH Merged Entity
Debt 11.4 20.3 31.7 Debt (w/o regulatory dues) 15.8 21.9 37.7
Regulatory dues 14.0 6.4 20.4 Finance cost (w/o regulatory dues) 1.3 2.8 4.1
Creditor for Capex 4.4 1.6 6.0
Finance cost % 8% 13% 11%
Adjusted Debt 29.8 28.3 58.1
Source: Company Annual Report, MOSL
EBITDA 9.8 10.1 19.8
Debt to EBITDA 3.0 2.8 2.9
D/E 6 62 13
Source: Company Annual Report, MOSL

ARPU growth subdued for both companies

 Over the past few years, ARPU growth of both entities has remained subdued,
primarily due to the skinny packs offered to acquire subscribers, especially in
the highly competitive Phase-III and Phase-IV markets. Management also
highlighted that cable has been the bigger dampener for ARPU growth.
 While VTDH has managed to maintain similar level of ARPU in FY17, DITV has
been at disparity in ARPU performance with its peers.

Exhibit 26: Declining ARPU impacted by intensifying competition

DITV VDTH

196 207 207

172 162 154

FY15 FY16 FY17

Source: Company Annual Report, MOSL

Rising churn rates remain a concern for both DITV and VDTH
 Subscriber churn has been increasing for both the entities over past few years,
leading to higher maintenance capex and lower capex being utilized for growth.
 Subscriber churn was higher for both entities in FY17 at 59% of gross addition
for DITV and at 50% for VDTH.

Exhibit 27: DITV subscriber churn rises in FY17 Exhibit 28: VDTH subscriber churn rises in FY17
Subscriber churn (% of net subscriber) Subscriber churn (% of net subscriber)
Subscriber churn (% of Gross addition) Subscriber churn (% of Gross addition)
50.2
59.1
34.1 36.6
42.4
37.7

10.5 9.5
7.6 8.3 9.1
8.8

FY15 FY16 FY17 FY15 FY16 FY17

Source: Company Annual Report, MOSL Source: Company Annual Report, MOSL

14 December 2017 10
 ART | Dish TV FY17

Higher subscriber acquisition cost (SAC) in FY17 remains a monitorable

 Hardware subsidy (SAC) has been a substantial cost for the industry. DITV’s SAC
stood at INR1,235 (FY16: INR1,100) and VDTH’s SAC was higher at INR1,897
(FY16: INR1,768).

Exhibit 29: DITV’s subscriber acquisition cost lower than… Exhibit 30: …subscriber acquisition cost of VDTH (INR)

1400 DITV VDTH

1235 1984
1897
1100
1768

FY15 FY16 FY17

FY15 FY16 FY17
Source: Company Annual Report, MOSL Source: Company Annual Report, MOSL

Exhibit 31: DITV’s net subscriber addition at 10% CAGR Exhibit 32: VDTH’s net subscriber addition at 22% CAGR

Net subscriber Dormant subscriber Net subscriber Dormant subscriber

5.0
8.9 3.9
7.3
6.2 2.9
4.5 5.2 2.0
1.3 13.0
15.6 10.2 11.9
12.9 14.5 8.4
10.7 11.4 6.7

FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17
Source: Company Annual Report, MOSL Source: Company Annual Report, MOSL

14 December 2017 11
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ART | Dish TV FY17
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