Tata Sky's project cost moves up to Rs 4,000 crore
Monday - Sep 15, 2008
Escalating competition in the direct-to-home (DTH) market has pushed up the project cost of Tata Sky, the joint venture between the Tata group and global media baron Rupert Murdoch's Star India, by a third. From the initially envisaged Rs 3,000 crore, Tata Sky's project cost has moved up to Rs 4,000 crore.
"The subsidies involved in aggressive pricing are high. We have also brought forward certain futuristic projects, such as the introduction of personal video recorders. These have increased the project cost to Rs 4,000 crore, which we are prepared for. This is a long gestation infrastructure business requiring very large investments," Vikram Kaushik, managing director and chief executive officer, Tata Sky said to Televisionpoint.com.
In 2007, the Tata group had brought in global private equity player Temasek by offloading 10 per cent stake in the company at a valuation of close to $ 55.5 million. The Tata group holds 70 per cent in the joint venture, while Star India holds the remaining 20 per cent.
Tata Sky was forced to offer larger subsidies on set-top boxes, thanks to its rival Dish TV giving away free set-top boxes in May this year. Prior to that, Dish TV had started offering monthly subscription packages as low as Rs 100 per month unleashing a price war in the business that has only one more player, DD Direct. In response, Tata Sky decided to offer higher subsidies on its set top boxes cutting the price paid by subscribers to Rs 1,499 from Rs 3,000.
"We set a record by adding a million subscribers in 11 months and two million in 23 months. The problem that is emerging now is finding out what new subscribers are willing to pay. Having penetrated premium households across India, we now are addressing consumers who need to see the value proposition, which is why we have cut the price of our base package by 20 per cent and come out with t several add-on packages," Kaushik added.
Kaushik claimed the company had spent a substantial sum on offering 10 proprietary interactive services to differentiate the service, since DTH regulations do not allow exclusivity of content. The company was also offering hefty subsidies to households with more than one Tata Sky connection. The monthly subscription package in this case was Rs 125 per month, instead of Rs 200 per month for the base package. A new base package price of Rs 100 too has been announced.
The company is going in for aggressive branding; development of software and roll-out of subsidised personal video recorders, which, it believes, will change the paradigm for high-quality TV experiences. "We are setting up a separate distribution chain, dedicated staff for maintenance of these products and specialised back end staff for this offering," said Kaushik.:thumbsup:
Despite the competitive market conditions emanating from price discounting by Sun TV (Rs 999 annual subscription package), entry of Reliance ADAG's Big TV and proposed entry of Bharti in the DTH business, Tata Sky's revenue target remains the same - Rs 5,000 crore turnover in five years. This level of turnover was projected on an investment of Rs 3,000 crore.
Tata Sky's project cost moves up to Rs 4,000 crore | Televisionpoint.com News
Monday - Sep 15, 2008
Escalating competition in the direct-to-home (DTH) market has pushed up the project cost of Tata Sky, the joint venture between the Tata group and global media baron Rupert Murdoch's Star India, by a third. From the initially envisaged Rs 3,000 crore, Tata Sky's project cost has moved up to Rs 4,000 crore.
"The subsidies involved in aggressive pricing are high. We have also brought forward certain futuristic projects, such as the introduction of personal video recorders. These have increased the project cost to Rs 4,000 crore, which we are prepared for. This is a long gestation infrastructure business requiring very large investments," Vikram Kaushik, managing director and chief executive officer, Tata Sky said to Televisionpoint.com.
In 2007, the Tata group had brought in global private equity player Temasek by offloading 10 per cent stake in the company at a valuation of close to $ 55.5 million. The Tata group holds 70 per cent in the joint venture, while Star India holds the remaining 20 per cent.
Tata Sky was forced to offer larger subsidies on set-top boxes, thanks to its rival Dish TV giving away free set-top boxes in May this year. Prior to that, Dish TV had started offering monthly subscription packages as low as Rs 100 per month unleashing a price war in the business that has only one more player, DD Direct. In response, Tata Sky decided to offer higher subsidies on its set top boxes cutting the price paid by subscribers to Rs 1,499 from Rs 3,000.
"We set a record by adding a million subscribers in 11 months and two million in 23 months. The problem that is emerging now is finding out what new subscribers are willing to pay. Having penetrated premium households across India, we now are addressing consumers who need to see the value proposition, which is why we have cut the price of our base package by 20 per cent and come out with t several add-on packages," Kaushik added.
Kaushik claimed the company had spent a substantial sum on offering 10 proprietary interactive services to differentiate the service, since DTH regulations do not allow exclusivity of content. The company was also offering hefty subsidies to households with more than one Tata Sky connection. The monthly subscription package in this case was Rs 125 per month, instead of Rs 200 per month for the base package. A new base package price of Rs 100 too has been announced.
The company is going in for aggressive branding; development of software and roll-out of subsidised personal video recorders, which, it believes, will change the paradigm for high-quality TV experiences. "We are setting up a separate distribution chain, dedicated staff for maintenance of these products and specialised back end staff for this offering," said Kaushik.:thumbsup:
Despite the competitive market conditions emanating from price discounting by Sun TV (Rs 999 annual subscription package), entry of Reliance ADAG's Big TV and proposed entry of Bharti in the DTH business, Tata Sky's revenue target remains the same - Rs 5,000 crore turnover in five years. This level of turnover was projected on an investment of Rs 3,000 crore.
Tata Sky's project cost moves up to Rs 4,000 crore | Televisionpoint.com News
