Tata Sky, the second-largest player in the highly-competitive Indian direct-to-home (DTH) market, has always been perceived as the premium service, and thus, an expensive player. In an interview with Gaurav Laghate, Tata Sky’s managing director and CEO Harit Nagpal clarifies that the company does not charge more than its competitors. Edited excerpts:
After first phase of digitisation, is Tata Sky ready to take advantage in the second phase that covers 38 cities?
We have been carrying out the exercise of digitising analogue cable customers across India for the past six years. We understand the process well and have the requisite infrastructure, in terms of IT and human interface, in place. Compared to digital cable, we have a six years’ lead of delivering digital services.
Now, about the second phase. A big door has opened. We are talking about very large volumes spread across the country. Everybody has learnt from the first phase and will use it in the second phase. Right now, there are many variables in air on how it will unfold, and it is difficult to predict the split of share between DTH and MSO (multi-system-operator).
Have you placed the orders for adequate number of set top boxes? What demand are you seeing?
We have placed the orders on the basis of optimistic assumptions, so that we do not fall short if there is need. And being a national player, if we have extra stock we can move our resources swiftly from one city to another. We did that in first phase also.
Your campaigns now emphasise more on the pricing, while Tata Sky historically has played up the quality of service. What is the idea behind this communication?
Customer research indicated a perception that Tata Sky charged more because we offer better quality. I want to break this myth. The price absolutely is at par with our competitors and we constantly monitor the prices of others to maintain parity. While we do not lead the price wars, we do match price drops by our competitors almost instantaneously. That was the logic behind our media campaign Poochne Mein Kya Jaata Hai.
In a competitive scenario where we have six private players, nobody can afford to charge higher price.
All the DTH companies have been facing a bandwidth problem. You also have almost discontinued business in Kerala and Tamil Nadu. How are you managing the bandwidth issue?
Having realised that we were short on bandwidth, we decided to forgo two states – Kerala and Tamil Nadu – a couple of years ago. Of these, we have recently revived Tamil Nadu. Rather than facing issues across the states, we isolated our shortage to just two states, while providing adequate content to the rest of the country.
Also, the number of regional channels in these two states is very high compared to other states. So, it was a strategic decision. Now that we have got some more bandwidth, we have increased the total number of regional channels in Tamil Nadu from eight to 20 in last couple of months.
What about your contract with the Indian Space Research Organisation (ISRO) for more capacity?
We signed contract with ISRO for a capacity of 12 Ku band transponders on its satellite five-years ago. The launch got delayed by three years. But now that the satellite has been launched successfully, we are hoping that ISRO will fulfil its contractual obligation and allocate the 12 transponders soon. It will take care of the bandwidth crunch.
The DTH industry has been marred with high taxation. What is the way out?
Taxes are undoubtedly very high in the DTH industry. We end up paying over 32 per cent of our revenues including 10 per cent licence fee, 12.3 per cent service tax, and 10 per cent (national weighted average) in entertainment tax. We have been demanding a rationalisation in the tax structure. We have been asking to reduce the licence fee to 6 per cent.
With the progress of digitisation, I hope the subscriber base will increase and it will give confidence to the government to reduce taxes.
Earlier, the issue of interoperability was being raised. But with different players using different formats of compression, it was never made possible. Today, do you see a need for the same?
Why today nobody talks about interoperability is because it is costlier than buying a new box. The cost of set-top-boxes has gone down significantly, and it makes more sense to change the operator by installing a new box. And the consumer does that, so it has become a non-issue.
No other nation has so many players in the DTH space. Don’t you think the competition is affecting business models?
We have seen hyper competition in other sectors also. Ultimately, a consumer benefits from that. Our philosophy is simple: if somebody’s P&L (profit and loss) sheet can afford, so can mine. Sooner or later, every player will realise that a balance has to be created for the business. And our scale does not put us behind any of our competitors as far as costs go. We have the same bargaining power as any of our competitors does.
But you said you pay 32 per cent in taxes. The content cost is an additional 35 per cent. Then there’s the cost of infrastructure and workforce. So how will you make money?
Internationally, the cost of content is around that (35 per cent). And it is necessary for the survival of the ecosystem that the content creators, in this case the broadcasters, get their due share. Otherwise, how will they invest in creating quality content? If they don’t, the customer will move to other sources to entertain and educate himself.
You have to realise that digitisation gives us bigger scale. Now with more transparent system, everyone will get their fair share and the health of the entire sector will improve.
Do you see any conso-lidation happening in the near future in the DTH sector?
Right now, everyone is busy in adding subscribers the organic way, as there are plenty (of subscribers) out there. As everyone’s hands are full, I do not see consolidation happening any time soon. Maybe after the digitisation when markets reach saturation. When there aren’t enough subscribers to add, platforms will look at this option.