MOSL: ANNUAL REPORT THREADBARE (ART) | DISH TV FY17-Declining ARPU and rising churn dent operating performance

​ANNUAL REPORT THREADBARE (ART) | DISH TV FY17: Declining ARPU and rising churn dent operating performance

Dish TV’s (DITV) FY17 annual report highlights a year of weak operating performance wherein (a) monthly ARPU declined to INR154 (FY16: INR162), (b) EBITDA margin declined 290bp to 32.5% on rising programming and call center charges, and (c) churn rates increased to 10.5% (FY16: 8.3%). FCF post interest adjusted for increase in creditors for capex and regulatory dues (which we consider as quasi debt) remained negative at INR4.1b (FY16: - veINR2.5b) due to high capex of INR8.6b (FY16: INR9.0b). Of the total capex, INR4.4b pertains to maintenance of the pre-existing net subscriber base and should (in our view) be adjusted through operating cash flows. Net debt (adjusted) increased to INR25.2b (FY16: INR21.9b). DITV continued to recognize DTA at INR0.7b (FY16: 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. Our analysis of DITV and VDTH (Videocon DTH) concluded with merged entity may have a high adjusted debt of INR58.1b with Debt-EBITDA ratio (adjusted) of 2.9x and finance cost of 11%.

Declining ARPU, increasing operating cost dent EBITDA: ARPU declined to a 5-year low of INR154/ month (FY16: INR162/ month) and led to tepid revenue growth of 4% to INR30.1b. While subscription revenue grew of 1% to INR18.1b, infra support services revenue grew 10% to INR9.6b. Higher operating cost – primarily programming cost and call center charges – led to a 290bp decline in EBITDA margin to 32.5%. Programming cost increased 7% to INR9.2b (FY16: INR8.6b). EBITDA declined 4% to INR9.8b.