22 September 2005

India drives Star profit to $128 m for fiscal 2005
Hindustan Times
(c) 2005 The Hindustan Times Ltd

NEW DELHI, India, Sept 22 -- India continues to be the growth driver for Rupert Murdoch-controlled Star Group, News Corp's pan-Asian venture.

Turnover rose 24% year-on-year during Q4 of fiscal 2004-05 reaching US $444 million, boosted by advertising growth of STAR Plus and STAR Gold channels along with contributions from new channels in India, which now contribute about 67% to the group turnover, according to a recent report by Hong Kong based research and publishing firm Media Partners Asia (MPA). During FY2005, advertising contributed 57% to group turnover with subscription at 35% and other business at 8%, the report indicated.

The firm's operating profits for the year ended June 2005 stood at $128 million, a surge of 113% y-o-y. Operating income stood at $109 million on a consolidated turnover of $444 million. Profit margins grew to 29% (EBITDA level) and 24% (EBIT) in FY 2005. MPA estimates indicate Star's FYE June 2006 EBITDA could reach $205 million (40% margin) while EBIT could grow to up to $190 million. Depreciation and capex costs continue to average at about $15-20 million per annum.

The report says: "Star is edging close to breakeven in China, though on a relatively low revenue base. The company continues to face regulatory barriers on the mainland with government authorities closely monitoring its activities".

Going forward, the firm plans to maintain and extend its leadership in India with Star Plus as well as increasing Star One's audience share; strengthening Star Gold; and launching global feeds. "T-Sky, Star's 20% owned $350 million DTH satellite JV with the Tatas, is expected to launch in March 2006, part of a bid to unlock value from India's underdeveloped and fragmented pay TV distribution chain, and provide meaningful competition to cable monopolies," said the report.

As for the rival Zee Telefilms, 20% owner of the Dish TV DTH platform, is slowly capitalizing on its first mover advantage in the market. The company added 140,000 subs during the June quarter, taking its total base to 300,000.

According to MPA's research, Dish TV is currently adding about 2,500 subs per day with customer subsidies up from Rs 750 ($17) to Rs1,000 ($22), thereby ensuring future competition will have to price competitively and subsidize heavily in order to achieve significant penetration or differentiation.

Dish TV is targeting 900,000 to 1 million subs by fiscal 2006, when it will likely be competing with T-Sky along with existing free-to-air DTH provider Doordarshan and perhaps Sun Media. MPA's forecasts on the DTH pay TV market in India (excluding DD) show a potential 7.2 million subscribers by December 2010. Before then, there may be a level of consolidation in the market, potentially between Zee and Reliance and between T-Sky and Sun.

The Hindustan Times is provided through HT Syndication, New Delhi.