While we remain sceptical about DTH getting regulatory approvals, we highlight the possible upsides assuming approvals were not an issue. While we dont see a case for content costs to come down but we do agree that future increase in content costs could be lower if DTH players come together and some savings are very much possible. Secondly, DTH players can benefit from incremental carriage revenues as it will be easier for new/small broadcasters to negotiate with a DTH JV representing three players and addressing 26m subscribers versus negotiating with 200 small MSOs to get the same reach.
Only a full-fledged merger can allow DTH players to have economies of scale and mere formation of JV for negotiating content costs may not be enough. A fully merged entity can save on transponder /distribution costs and content costs.
We remain cautious on Dish TV with a DCF based target price of R53. Key upside risk will be higher-than-estimated increase in cable TV ARPU and meaningful improvement in carriage fee.