Dec 2, 2008

Business - India;DTH operators may hike prices by 15%

The direct-to-home (DTH) space, which has so far been witnessing a price war owing to stiff competition, will soon see prices going up by as much as 15%. This is because the weakening rupee against the dollar may increase the cost burden of set-top boxes (STBs), which are imported by DTH operators. Operators, in turn, may increase their prices, which will come into effect from the first week of December.

Currently, almost three million STBs are imported in the country every year. Operators now acquire a subscriber for Rs 2,600- Rs 5,600 per connection, which include the cost of the set-top box, monthly content cost, and advertising & promotion costs.

Industry sources told FE that market leader Dish TV is planning to increase monthly subscription by about 12-12.5%. Since the past few months, all DTH operators have been absorbing the burden of taxes, which may now be transferred to the customers. Sources also disclosed that Tata Sky is evaluating to what extent the prices need to be reworked. One analyst said that the impact of a price rise at this point in time could be huge on Tata Sky.

However, BIG TV, which recently acquired one million subscribers, is not planning to increase its base price of Rs 1,490. Sources in Big TV said, "we are evaluating an option of not passing the service tax burden to the subscribers, although, we are yet to arrive at any decision."

As per DTH industry estimates, each DTH operator buys the normal MPEG2 STB at about Rs 1,568- Rs 2,450 per STB and higher end MPEG4 STB (higher compression technology) at Rs 2,500-Rs 3,038. In the past few months, all DTH companies had reduced STB prices as well as subscription prices and the lowest monthly subscription fee stood around Rs 99. The price war became stauncher with the entrance of new DTH operators like Big TV and Bharti Airtel.

The price rise comes at a time when most DTH operators are considering introducing high definition (HD) services in India. This would require DTH operators to buy hi-end MPEG4 enabled STBs. The price rise may now force DTH operators to delay the plans of launching HD enabled STBs in the near future.

Tata Sky which has already introduced its personal video recorded (PVR) service is currently charging a high premium for the service. Dish TV had plans to start selling its high definition (HD) STBs by December 2008. BIG TV plans to launch its HD services by Q4 of current fiscal. BIG TV is currently evaluating two variants for its HD service.

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