The Telecom Regulatory Authority of India (TRAI) recently notified 27.5 percent hike in tariff ceiling for cable TV, the move while negative for direct-to-home (DTH) companies like Hathway and Den Networks is expected to be positive for broadcasters like Sun TV.
SL Narayanan, Group CFO of Sun Group says the move will help broadcasters get a better share of value.
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The company also has presence on the distribution side through Sun Direct.
He feels content cost will have to go up in the foreseeable future, which will enable broadcasters to invest in better quality content and make the programming that much more fresh.
Below is the verbatim transcript of SL Narayanan's interview with Anuj Singhal and Sonia Shenoy on CNBC-TV18.
Sonia: Can you quantify what the impact could be on a company like Sun TV, this hike in cable tariff?
A: I shall not put a specific number. It is a very positive move. It certainly helps broadcasters to get a better share of the value. We have also had this thing be kept under check because of various reasons. There was a reference rate and then it went into litigation. It is heartening to note that we are now going to be in a position to get a slightly better realisation.
Anuj: There is a report which says that this order is positive for broadcasters but negative for DTH players. Since you have a leg in both the businesses if you could explain to us, how this will impact the company like yours financially?
A: I think at a very general level, content costs have to get recognized in the true measure by all distributors. So though we do have a presence in the distribution side through Sun Direct, any kind of artificial restrains on pricing is not good.Outstanding content will get the patronage from the consumers and at the end of the day unless you have the right content, nobody is going to subscribe to your service. So I think the distributors also need to take a very holistic view of this.
I am sure you know the kind of prices that most consumers pay in other part of the world for either cable TV or Dish TV. Prices have been unnaturally low here for a long time because of a variety of legacy issues like underreporting and what not. The government is definitely trying to change all that through digitization and more transparency but I think content cost will have to go up in the foreseeable future, which will only enable broadcasters to invest in better quality content and make the programming that much more fresh otherwise we are going to see a lot of rehash.
Sonia: Any idea of how much this could increase the average revenue per user (ARPUs) and the subscription revenues, any ballpark numbers?
A: We are also very close to the announcement of the results. I don't want to get into any specific numbers. Suffice it to say that it will be a big positive for all broadcasters.
Anuj: Your press release had valid arguments and a lot of people are surprised that you gave in to the DGCA diktat without any fight and maybe you should have gone to competition commission or should have taken the issue further, why did you give in after just one day?
A: We have great respect for the regulator for doing a great job. Whatever be our views on this, I still believe that there is no mandate for any kind of price control, there is free pricing, just as sometimes it is necessary to offer prices as low as Re 1 to stimulate demand, at other times we have seen prices go up to Rs 40,000 one way for a ticket from Delhi to Goa and that is why these popular sentiment goes the other way and say that airlines are gouging consumers neither of which is true. We need to balance pricing and be influenced by the forces in the market because at the end of the day nobody wants to take prices to a ridiculous level where it becomes self defeating. The objective here is to make sure that we employ our assets judiciously because end of the day it is at least USD 2 billion of equipment which is being employed is SpiceJet and we need to make sure that we have a decent return on all that investment.
Sonia: This Re 1 fare has been blocked by the DGCA but does this mean that SpiceJet will not give any more discounts or schemes in the days to come because since the start of the year, you have already gone through 3 rounds of a fare wars?
A: I think the objection was only because it seemed extremely unnatural. Although as I said earlier on the channel, it is only just about 1.7 percent. It is not something which - first of all at 20 percent market share, we cannot be the price leader. So this is more done with a view to improving our asset productivity but I think now the matter is settled. First of all, let me make it clear that we are not here to pick up fights.
Hathway Cable stock price
On April 02, 2014, at 14:15 hrs Hathway Cable and Datacom was quoting at Rs 250.65, up Rs 0.30, or 0.12 percent. The 52-week high of the share was Rs 301.70 and the 52-week low was Rs 235.05.
The latest book value of the company is Rs 53.30 per share. At current value, the price-to-book value of the company was 4.70.
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