Videocon d2h: An Emerging Market Growth Story

As the Indian economy is progressing, it is resulting in higher per capita income and thus a higher purchasing power. And with a higher purchasing power comes the tendency to spend more making India more of a consumer economy. One of the indicators suggesting this is the growth in the Pay TV (mostly cable and satellite TV) subscriptions.

With the Government of India pushing for digitization, we are going to see the analog cable TV phased out while the direct to home (DTH) digital TV will take the lead. With a strong subscriber growth outlook, the DTH sector is gaining market share over cable TV each month.

Among the leading DTH service providers operating in India, one is Videocon d2h (VDTH), which is the fastest growing pay TV operator in the country as it commands around 20% of the DTH market, up from just 9% four years ago.

Videocon d2h recently announced its financial results for the quarter ending June 30, 2015 in July. And the figures the company retuned were great and in line with the guidance it provided for fiscal 2016. It saw strong subscription revenue growth of 32.2% from the year-ago quarter. Revenue from operations grew 23.3% year on year as well. Meanwhile, the adjusted EBITDA increased 28.3%, while the EBITDA margin of the company expanded 110 basis points to 28.7% despite a significant increase in content costs as a percentage of revenue.

Videocon d2h has got a gross total of 13.70 million people subscribed to its DTH services with 0.61 million gross subscribers added just during the last quarter. During the same period, the company acquired 0.46 million net subscribers. Its net subscribers totalled 10.64 million at end of the first quarter. The customer churn rate in the last quarter stood at 0.46% for the quarter as compared to 0.42% in the prior-year period. The average revenue per user (ARPU) has increased 10% as well.


Videocon is among the top 3 DTH service providers in India, the other two being Dish TV and Airtel DTH. Together, these three own more than 65% of market share in India. Videocon is at number two in terms of subscriber base but number 3 in terms of revenue owing to its lower ARPU compared to the close competitor Airtel. Dish TV is anyway the largest among the three. And despite the lowest ARPU, Dish TV is also the first among listed DTH companies in the country to report a profit after tax.

Videocon’s operating profit is the lowest among the three major players in this emerging market. And it is still running with a net loss. So, Videocon, at the end of the first quarter, still ranks behind the other two mentioned above. Still, looking at the pace at which it is growing, we may well see a change in rankings as early as the end of the current fiscal.

It has grown its subscriber base by 17.1% over the last year. Its churn rate is below 0.5%, one of the lowest across the industry. On the back of this rise in popularity, the company has gained a large portion of market share very quickly (9% to 20% in 4 years), and its net loss remains less than half of what it was at the end of the June quarter a year ago.

Moreover, its ARPU has increased by close to 10% due to an increase in pack prices, higher HD up take and value added services. HD subscribers represent almost 10% of our total net subscribers and that percentage is increasing fast. All this will translate into profitability in the near future.

Outlook and conclusion

Mr. Anil Khera, CEO of Videocon d2h, said, "We believe around 100 million homes will be up for grabs by digital cable and DTH operators in the next 4-5 years. DTH should gain higher market share in Phase III and IV of the Government of India digitization plan in comparison to the prior phases.” The company expects H1 FY16 EBITDA to grow 25% to 30% year-on-year, an addition of 1.3 to 1.4 million gross subscriptions and an ARPU of INR 215.

Hence, Videocon is set to get better going forward due to the variety of reasons discussed above and looks like a good emerging market growth story.

Published on Sep 16, 2015
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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