Dish TV India Limited Investor Presentation
Disclaimer Some of the statements made in this presentation are forward-looking statements and are based on the current beliefs, assumptions, expectations, estimates, objectives and projections of the directors and management of Dish TV India Limited about its business and the industry and markets in which it operates. These forward-looking statements include, without limitation, statements relating to revenues and earnings. The words believe, anticipate, expect, estimate", "intend, project and similar expressions are also intended to identify forward looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the control of the Company and are difficult to predict. Consequently, actual results could differ materially from those expressed or forecast in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, changes in the regulatory environment and other business and operational risks. Dish TV India Limited does not undertake to update these forward-looking statements to reflect events or circumstances that may arise after publication. 2
Indian M&E Industry Snapshot M&E industry composition & size (INR bn.) TV Print Films Others 307 133 17% 62 14% 11% 125 220 104 14% 417 2013 12% 2018 18% 241 45% 2008 42% 243 374 172 26% 21% 30% 580 918 1,786 885 50% Broadcasting Industry Multiple broadcasters producing content in 15 languages across 7 genres beaming ~788 channels Indian Television Industry DTH Distribution Industry Analog Cable 28% 52% Digital Cable 20% Indian television market statistics (mn. HHs) 223.2 126.6 90.7 262.3 161.8 134.7 295.9 192.3 164.8 2013-2018 TV penetration (of total HHs) ~ 62% - 65% C&S penetration (of TV HHS) ~ 83% - 86% Average household size of 5.1 2008 2013 2018 Total HHs TV HHs C&S HHs Source: M&E industry composition & size: FICCI-KPMG 2014, Indian television statistics & broadcasting and distribution industry: MPA Report 2014 3
Distribution Industry 4
Digital Addressable Systems - DAS Phase I Delhi, Mumbai, Calcutta & Chennai 30-June-2012 Phase II 38 notified cities 31-Mar-2013 Phase III/IV Rest of India 31-Dec-2015/2016 Land grab seeding at throw away prices No addressability/kyc Working backwards to fill in the critical gaps; billing, collection and dunning Opening up of cable stronghold markets Bonus additions for the sector Cable DTH Dish TV Higher incremental net adds; positive shift in subscriber distribution Bulk of the potential DAS converts Limited coverage by large MSOs due to dispersed population Very high DTH recognition DTH best suited considering terrain Key target markets with more than 90% 60% incremental of Total Revenue potential for DTH Digital Penetration of Total Pay-TV Subscribers in India is Amongst the Lowest * 120% 100% 80% 60% 40% 20% 0% 100% 100% 100% 100% 100% 100% 99% 93% 69% 45% Source: *MPA Report 2013 5
Distribution Industry - Cable 3 Tiered Structure MSOs (more than 115 ) Pre-DAS 1990-2014 Analog signal - limited carrying capacity, broadcasters jostling for PCS Placement & Carriage fees - bulk of MSOs top-line Massive under declaration ignored to maintain MSOs reach. Reason behind LCOs prosperity No incentive to raise ARPUs Distributors (at least one in each locality) LCOs (more than 50,000) Post-DAS Digital signal - fatter pipe, larger carrying capacity Placement fees mindset B2B billing 100% postpaid. Element of bad debts? Impairment of Set-Top-Box (STB)? RIO deals a game changer? 6
Distribution Industry - DTH 100% digital Owns last mile subscribers Subscription driven top-line Fully prepaid, no bad debts DTH contributes ~ 60% of the broadcaster s domestic subscription revenue; scope for rationalization vs. cable Fully tax compliant Heavily taxed: License fees 8% AGR instead of 10% GR (TRAI recommendations on issues related to new DTH licenses) Entertainment tax & Service tax - likely to be subsumed post rollout of GST Dish TV Tata Sky Sun Direct Reliance Digital Airtel Digital Videocon D2h DTH Players in India Industry pioneer. Started operations in 2003 Part of the Zee stable, largest producer and aggregator of Hindi programming in the world Launched in 2006 JV between the TATA Group and News Corp Launched in 2007 JV between Sun Network and Astro, Malaysia Part of Reliance Communication Ltd, a subsidiary of Reliance ADA group Launched in 2008 Part of the telecom major Bharti Airtel Launched in 2009 Part of the white goods manufacturing, Videocon group 7
Dish TV 8
Key Managerial Personnel Subhash Chandra Jawahar Lal Goel Key Managerial Personnel Pioneers and Visionaries Non Executive Chairman Promoter of the Essel Group of companies India s media mogul and founder of Zee, India s first satellite television channel in 1992 & later India s first private news channel, Zee News A self-made man, has consistently demonstrated his ability to identify new businesses and lead them on the path to success Other business interests, education, theme parks, wellness Managing Director Key architect in creation and expansion of Essel Group of Companies Key architect of cable TV services, established Siti Cable in 1994 Pioneered the DTH services in India and has been instrumental in establishing Dish TV Past president of IBF for four consecutive years upto 2010 An active member on the Board of various committees set up by MIB, for addressing critical industry matters First DTH in India 65% 8% 13% 3% 11% Promoters GDR; held by Apollo PE, USA FII (incl. 3% of Apollo PE) Fin. Inst., Banks & MF Other Investors Shareholding Pattern* Many Firsts to its Credit First to negotiate content on a fixed fee basis First to launch Live TV for moving vehicles First to achieve operational break-even in the DTH industry First to launch High Definition R.C. Venkateish CEO India and South Asia MD of ESPN Star Sports prior to joining Dish as its CEO. Current President of DTH Operators Association More than 27 years of experience & a successful track record in turning around businesses for brands like Oral-B, Nestle and Kellogg s First to offer unlimited recording First to be FCF positive First to launch online TV for DTH viewers Dish Online First to launch a sub-brand targeting regional language markets Zing *Shareholding pattern as on 31 st December 2014 9
Expenses Revenue Business Model P&L Structure Q3 FY15 Business Model POSTPAID 100% prepaid PREPAID Subscription revenues 92% Upfront subsidy on Consumer premises equipment (CPE) Box Rent Bandwidth income Advertising income 3% 3% 1% Other income 1% Average ARPU of Rs. 177 Employee benefit expenses Programming and other cost License fees 4% 28% 10% Churn at 0.7% p.m. Other operating costs Selling and distribution expenses 11% 16% Other expenses 4% Implied average subscriber life of 12 years EBITDA 26.8% 10
Dish TV vs. Competition Linear and True HD channels Dealer-Distributor Network Highest transponder capacity Maximum content tie-ups Maximum HD channels Widest dealer-distributor network 500 400 300 200 100 0 383 358 356 312 241 213 37 28 26 25 10 11 Dish TV Videocon Airtel Tata Sky Rel. Digital Sun Direct Linear HD 90% of Total Revenue Transponder Bandwidth Satellite NSS6, Asiasat 5 Number of Transponders Dish TV Tata Sky Airtel Sundirect Reliance Digital Videocon Insat 4A SES 7 Measat 3 Measat 3 Singtel ST-2 & SES - 8 16 12 11 4+2 9 8 TP Bandwidth (MHz) 36,54 36 36 36 36 54 Total Bandwidth (MHz) 720 432 396 216 324 432 30% of Revenue 6 Zonal offices 14 Regional offices Source: Company & market data as on 31 st December 2014 11
Key Metrics 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2.5 4.3 Net subscriber base (mn.) 10.7 11.4 11.7 12.1 9.6 8.5 5.7 12.5 0.500 0.400 0.300 0.200 0.100 0.220 Net subscriber additions (mn.) 0.378 0.416 Market share* 12% 6% 19% 16% 20% 27% Dish TV Tata Sky Sun Direct Big TV Airtel Digital Videocon D2h 0.000 80% 70% 60% 50% 40% 30% 20% 10% 0% 3QFY14 2QFY15 3QFY15 90% of Total Revenue Programming and Other Costs as % of Subscription Revenues 75% 64% 55% 43% 37% 34% 34% 34% 31% 30% Source: Company Note : * Market share based on gross subscribers as on 31 st December, 2014 as per market estimates 12
Key Metrics (continued) 200 150 131 132 138 ARPU (Rs.) * 150 151 157 163 150 166 ARPU (Rs.) 172 177 100 100 50 50 - FY08 FY09 FY10 FY11 FY12 FY13 FY14-3QFY14 2QFY15 3QFY15 SAC (Rs.) * 90% of Total Revenue SAC/ARPU (months) 3,000 2,500 2,000 2,035 2,505 2,383 2,224 2,127 1,996 1,800 20 15 16 19 17 15 14 13 11 1,500 10 1,000 500 5 30% of Revenue - FY08 FY09 FY10 FY11 FY12 FY13 FY14 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Source: Company Note : * SAC & ARPU taken as Q4 data for respective years. 13
Strategy and Outlook 14
Zing - Phase III & IV Markets Viewership share by genre 2013* 8.6% 18.0% Sub Brand of Dish TV Regional first; regional language channels, regional look and feel Regional first national second; unlike mainstream brands Customized regional content in digital picture quality and stereophonic sound Value for money offering; Digital quality picture at cable price Healthy gross margin After successful launch in seven states, Zing introduced in Tamil Nadu 12.3% 2.6% 1.2% 90% of Total Revenue 18.4% 30.0% Regional GECs, Regional News, Movies & Music Hindi GECs Hindi News 30% & Movies of Revenue English Entertainment & News Sports Music, Kids & Infotainment Other 8.7% Source: * FICCI Frames - 2014 15
High Definition Dish TV Tata Sky Videocon D2h Box Cost Rationalization HD Focused Content Deals Compelling HD Proposition Sports Channels Super Family + Dhamal Mix + Super Gold + Game on HD HD Access Fee HD Access Fee Rs. 375 Rs. 355 Rs. 356 Star Sports HD1 x x Star Sports HD2 x x Sony Six HD x x Ten HD x x 3 HD ADD-ONS Game on HD @ Rs. 135 (Sports and Hindi entertainment) Life on HD @ Rs. 185 (English entertainment with Sports and Hindi Entertainment) Full on HD @ Rs. 210 (Complete dose of entertainment) Source: Market data as on 6 th February 2015 16
% Pay-Tv Pen./TV HH 4 Metro cities 4 Metro cities 4 Metro cities 4 Metro cities ARPU Expansion 500 400 300 200 200 220 220 230 240 250 Pack Price Hike - SD (Rs.) 275 285 295 255 280 300 320 335 345 380 400 460 440 421 470 100 0 Super Family Maxi Sports # All Sports Platinum Sports Previous price Revised price (w.e.f. April'13) Revised price (w.e.f. June'14) Revised price (w.e.f. August'14) Revised price (w.e.f. Feb.'15) 4 Metro cities Korea ARPU as a % of GDP per HH* 100% Taiwan 90% India 80% 70% 60% 50% China Pakistan Malaysia New Zealand 40% 30% Japan Vietnam Australia 20% Indonesia 10% Sri Lanka Thailand Philippines 0% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% Pay-TV ARPU as a % of PPP-adjusted GDP per Household Source: * MPA Report 2013 # Maxi Sports pack @ Rs. 275 introduced with effect from August 14 17
Decreasing Cumulative Investment per Subscriber Dish TV - Investment per net subscriber (Rs.) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500-3,359 3,218 2,939 2,837 FY - 11 FY - 12 FY - 13 FY - 14 Note: Based on cumulative investments, including accumulated losses, per net subscriber 18
International Expansion - Sri Lanka 2,000 1,500 1,000 500-350 216 Pay TV Subscribers (000) 929 534 228 93 41 167 1,480 812 340 328 2011 2016E 2020E Pay TV Subs DTH Subs Cable Subs IPTV Subs Pay TV Industry Revenue (USD mn.) 5, 11% 14, 32% 25, 57% DTH revenue Cable TV revenue IPTV revenue Population ~ 20 million TV penetration at 74% High digital penetration; 77% of total Pay TV subscribers DTH maintains dominance with ~ 62% market share. Cable, distant second despite being 4 years older ARPU ~ USD 8 pm Zero subsidy on CPE sales Source: MPA 2012 19
Financials 20
Summarized Standalone P&L - Quarterly 3QFY 2014 vs. 3QFY 2015 Quarter ended Quarter ended Rs. million Dec. 2013 Dec. 2014 Operating revenues 6,128 7,139 Expenditure 4,773 5,227 EBITDA 1,355 1,912 EBITDA Margin (%) 22.1 26.8 Other Income 97 154 Depreciation 1,534 1,616 Financial expenses 301 479 Profit / (Loss) before prior period & tax (382) (29) Prior period items - - Tax expense/(write back) - - Net Profit / (Loss) for the period (382) (29) Variance(3QFY14 vs.3qfy15) in % 9.5 5.3 16.5 41.1 58.8 59.1 Operating revenue break-up (Rs. mn) 209 200 91 85 6,554 3QFY - 2015 Subscription revenue Lease rentals Bandwidth charges Advertiseme nt income Teleport services, CPE & Other 21
Summarized Consolidated P&L - Annual FY 2013 vs. FY 2014 FY 2013 FY 2014 Rs. million (Audited) (Audited) Operating revenues 21,668 25,090 Expenditure 15,874 18,849 EBITDA 5,794 6,241 EBITDA Margin (%) 26.7 24.9 Other Income 511 649 Depreciation 6,276 5,974 Financial expenses 1,284 1,327 Profit / (Loss) before exceptional items (1,254) (412) Exceptional items 594 - Profit / (Loss) before prior period & tax (660) (412) Prior period items - (1,164) Tax expense/(write back) 0.1 0.5 Loss attributable to minority 0.1 - Net Profit / (Loss) for the period (660) (1,576) Variance(FY13 vs. FY14) in % (4.8) 3.3 7.7 15.8 18.7 27.0 Operating revenue break-up (Rs. mn) 1,169 496 383 360 22,681 FY - 2014 Subscription revenue Lease rentals Bandwidth charges Advertiseme nt income Teleport services, CPE & Other 22
Consolidated Balance Sheet FY13 vs. FY14 Rs. million FY 2013 (Audited) FY 2014 (Audited) EQUITY AND LIABILITIES Shareholders funds (a) Share capital 1,065 1,065 (b) Reserves and surplus (2,621) (4,191) (1,556) (3,126) Non-current liabilities (a) Long-term borrowings 8,460 7,791 (b) Other long term liabilities 1,504 918 (c) Long-term provisions 127 142 10,092 8,851 Current liabilities (a) Short-term borrowings 300 658 (b) Trade payables 2,138 1,357 (c) Other current liabilities 14,027 11,601 (d) Short-term provisions 6,547 8,361 23,012 21,977 Total 31,548 27,702 23
Consolidated Balance Sheet (continued) FY13 vs. FY14 Rs. million FY 2013 (Audited) FY 2014 (Audited) ASSETS Non-current assets (a) Fixed assets (i) Tangible assets 14,273 13,495 (ii) Intangible assets 67 76 (iii) Capital work-in-progress 6,535 4,226 20,875 17,797 (b) Non-current investments - 1,500 (c) Long-term loans and advances 646 881 (d) Other non-current assets 97 73 743 2,454 Current assets (a) Current investments 2,782 500 (b) Inventories 86 75 (c) Trade receivables 304 415 (d) Cash and bank balances 3,645 3,426 (e) Short-term loans and advances 3,060 3,029 (f) Other current assets 53 5 9,929 7,451 Total 31,548 27,702 24
Thank You 25
Annexure 26
Essel Group Launched in 1976, Essel Group is one of India s largest business houses, with a dominant presence in Media One of India's largest vertically integrated media and entertainment group, and also one of the leading producers, content aggregators and distributors of Indian programming globally One of the largest producers and aggregators of Hindi programming in the world Founded by Dr. Subhash Chandra Group Market Cap ( Listed entities under Essel Group ): Rs 507 bn (1) Essel Group Media Other Businesses Launched in 1992 One of India s largest media and general TV entertainment network Content Launched in 1992 Strong presence in Asia s largest DTH national and regional news service provider genre Market Cap: Rs 374 bn (1) Market Cap: Rs 6.7 bn (1) Launched in 2005 Distribution Zee Entertainment Zee Media Corp. Ltd. Dish TV SITI Cable Network Launched in 2006 One of India s largest MSO, presence across 54 cities Market Cap: Rs 84 bn (1) Market Cap: Rs 22.1 bn (1) Daily News & Analysis Launched in 2005 English broadsheet daily with presence across Mumbai, Bangalore, Pune, Ahmedabad, Jaipur & Indore Packaging (Essel Propack) Market Cap: Rs 20.3 bn (1) Theme Parks: Essel World and Water Kingdom Playwin: India s first and largest online gaming company Cornership: Animation studio Cyquator Technologies: IT Infrastructure outsourcing Infrastructure Education Precious Metals Healthy Lifestyle & Wellness Source: Company websites, BSE, MPA Report 2013 Note: (1) Market capitalization as on 27 th January, 2015 27
Key Milestones and Performance Oct 03: Received license to operate DTH Services May 05: Launch of DTH Services Apr 07: Listing of Equity Shares on NSE and BSE May 10: Launched HD services Dec 10: Acquired additional transponders on Asiasat 5 First full year of Positive FCF 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Apr 04: Obtained teleport license from MIB Jan 09: Rights offering of shares for ~Rs. 11.4 bn. Mar 09: EBITDA breakeven in Q4 FY09 Nov 09: Raised $100mn through GDRs to Apollo for 11% ownership July12: Net subscriber base crosses 10 million - Full year of Positive FCF - Launch of Zing Growth Trajectory Since Listing Company Profile Net Customer Base Total Revenues 2008 (1) 2014 (2) First Indian DTH player Asia s Largest DTH Provider < 3.0 million 11.4 million Rs 4,162 million Rs 25,090 million EBITDA (% margin) Market Capitalization (3) (Rs 2,095 million) ~ Rs 21.1 billion Rs 6,241 million (25%) ~ Rs 54.8 billion Source: Company filings, Company website, BSE, NSE, MPA Report 2013 Notes: (1) 2008 reflects FY 2008 year end results (2) Total Revenues and EBITDA for 2014 reflect FY2014 year end results. Customer base as of March 31, 2014 (3) 2008 market capitalization as on March 31, 2008; 2014 market capitalization as on May 28, 2014 28