Sun Direct, the fourth largest Direct-to-Home (DTH) operator in India is still witnessing “tremendous demand” for its Set-Top Box (STB) with the company expecting the DTH sector to generate double-digit revenue growth. The development was shared by SL Narayanan, group CFO of Sun TV Network in the second quarter earnings call on November 12, 2020. Sun TV Network on November 12, 2020 reported its second quarter financial results for the period ended September 30, 2020, with the company recording 14% improvement in subscription revenues. The company that operates satellite TV channels across multiple Indian languages highlighted that the DTH sector generated Rs 232 crore revenue in its second quarter, up 12% Year-over-Year (YoY).
Sun Direct Set to Import Additional Set-Top Boxes to Meet Demand
Narayanan said that the DTH sector “still has some steam left” but that the cable TV segment “may not grow double-digit in the foreseeable future.”
“I'm saying this because we know what's happening in our sister company, Sun Direct,” Narayanan said in the earnings call. “I think at least for another year, we should be able to post double-digit growth, because there is certainly that demand, and we are getting ready with imports of set-top boxes and all that.”
However, Narayanan said that the New Tariff Order (NTO) “created a huge disruption” for the company as the Telecom Regulatory Authority of India (Trai) “forced” the operators “to price every channel.”
“We had to price it accordingly to protect the erstwhile ARPUs and which is why everything went into a different pattern,” Narayanan said. “But if you see the overall revenues, we are still growing at about 13.5%, 14%. Because there is some kind of a swing that's happening, because some people are now taking fewer channels.”
Narayanan said that the users stopped subscribing to additional channels due to the revamp in the pricing mechanism. Further, the group CFO said that the company is “happy” as long as it is able to generate certain average revenue per user (ARPU) from its subscribers.
“Within DTH, there was a lot of homogeneity in terms of the pricing pattern and that's what completely changed, because today, there are as many packages as there are customers,” Narayanan said.
SunNXT Emerges As “Fastest Growing” Segment for Sun TV
Meanwhile, the group CFO also highlighted that the SunNXT, the Over-the-Top (OTT) platform has emerged as the “fastest growing” segment of the company’s subscription business. Narayanan said that the OTT revenues will “continue to grow” as a “lot of people are in the market for content” and that the company is sitting “on a lot of content.”
“People are willing to pay a good price," Narayanan said. "And increasingly, we will also start billing them on a per subscriber basis. We were working on flat fee deals. And as the subscriber base went up with our customers, we were able to get better ones.”
ICICI Direct in a research report said that the traction in SunNXT will be a “key monitorable” in the upcoming quarters.
“The management indicated that additional investment in SunNXT and release of OTT originals is likely in FY22E,” ICICI Direct said in its report. “SunNXT ramp-up and revenue growth will be key monitorables.”
Crucially, Narayanan said that the company witnesses 40,000 to 50,000 new users “every time some movie premieres on SunNXT.” Further, the group CFO said that the company will invest up to Rs 200 crore a year on "content exclusively for Sun NXT.”
“Management remain committed of acceleration of investments in digital business from future-proofing perspective,” Dolat Capital said in its research report. “But, there had been disconnect and delays in intent and execution. Thus delivery would be crucial.”
