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January 13, 2008

Will DTH rain profits?

Businessworld has an article on the state of the Direct to Home (DTH) satellite TV market.
Within a few months, at least four more players will launch brand new DTH services. Until recently, state broadcaster Doordarshan was the only other player in the DTH market. New entrants such as Bharti Airtel, Reliance Communications (RCOM), Sun TV and Videocon are expected to spark off price and content battles, and new marketing and distribution strategies. The grand prize is a market worth $5 billion (Rs 20,000 crore), and an estimated 40 million DTH subscribers by 2017.

... By far the biggest challenge facing DTH players will be short- and medium- term profits. The industry complains that it already pays higher taxes than other sectors. The heavy taxes, according to Tata Sky’s Kaushik are ‘almost punitive’. There is an annual licence fees (10 per cent of gross annual revenue), a service tax (12.5 per cent) and entertainment tax (between 15 to 20 per cent, varying according to states). Dish TV and Tata Sky are already hurting from losses. Dish TV reported a net loss of Rs 90 crore in the previous fiscal. Tata Sky’s numbers are not available.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.