Below is the edited transcript of his interview to CNBC-TV18.
Q: How do you see subscription revenue growth in the second half of the year, in the first half at least in the past six quarters, they have range from low single digits to at times even negative, the second half there are some people who expect a double digit growth, are their hopes fructifying?
A: Basically, we have seen complete reversal of stocks because digitization was still a distant thing but in the last few weeks we have seen with great satisfaction the progress on the ground.
It is more heartening to see that the government is extremely committed to the implementation date for the phase II, which is April 1. Sun TV has some large markets on footprints like Hyderabad, Bangalore and Vizag. The subscription revenues are good and there has been tangible evidence of increased sales of DTH connections on the ground. The company is in much better shape now.
On the cable side, we had signed the deal with Arasu, which is the analog system in Tamil Nadu. So we will see the first full quarter of revenues coming in from that set of subscribers. In December 2011, no revenue was contributed from the Tamil Nadu analog ecosystem. But in this quarter we will see revenue between Rs 7.5-8 crore.
Q: Overall, what might be the subscription revenue growth you think in the second half, year-on-year comparison?
A: Between direct-to-home (DTH) and cable, we are growing at about 8-9 percent and we will do even better in this quarter.
Q: How is the ad revenue looking at this point in time especially for Sun TV and do you expect to come back to those growth rates that you were clocking possibly in FY10-FY11?
A: Ad revenue is looking better. We had been consistently guiding to a low single digit growth in the first half, we are now confident that we will see double digit growth in the second quarter.
Q: Will you be able to push up therefore ad rates?
A: No, at this time we are still coming out of a very difficult situation. Right now we are seeing some early signs of growth. We don't have any plan to increase tariffs but towards the start of the next financial year, we could see some opportunities for growth.
Q: Can you quantify when the last time ad rate hike was taken was?
A: We did not increase ad rates for the whole of FY12 but before that we had some increases. FY12 was an extremely difficult year not only for the media industry but across the board. Interest rates were high; there were difficult situation in telecom and auto business.
Interest rate sensitive like auto and real estate was down. FMCG sector cut down their spending and 55 percent of our revenue comes from the FMCG universe. So we took bidding in FY12 because of a variety of reasons so we did not increase rates that year. About nine months gone into the current financial year, I do not think we will increase rates before the start of next financial year.
Q: Many analysts were quite surprised with the move with regards to the IPL diversification. Can you explain the rationale behind the diversification into cricket considering the past that we have seen in terms of finances have not been great for the IPL franchises, do you think that for a company such as Sun TV which has had a very clean balance sheet as of now, it would put some amount of added stress going forward and might not be taken that keenly by investors?
A: Our diversification in to IPL will not in any way disturb the strength of our balance sheet because the way the cash flows are planned out for IPL, whatever we keep spending, keeps coming back in terms of distribution from the central sponsorship rights. So we do not think there will be any major investment into the IPL business barring some lost funding in the first year which is not going to be more than 50 paisa per share.
We will see a breakeven in the beginning of second year. We have not bid extraordinarily high sum of money. Our bid amount was about 50 percent of the amounts that were bid in the previous rounds. So we are very conservative for putting out our bid amounts and we also think that given the kind of distribution possibilities out of the central pool which Board of Control for Cricket in India (BCCI) controls, there will be very minimal exposure, more like a working capital funding.
We will start making money from third year onwards. The title sponsorship rights have now gone for a substantially higher sum for the second half of the IPL tenure. Those upsides have not even been factored into our business plan projections.
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