Arasu Cable might be a “blow” to DTH operators in Tamil Nadu, if the state-owned multiple system operator (MSO) adds prominent pay channels to its bouquet and still offers connection at Rs 70 a month, said industry sources.

The DTH industry has already been burdened with ‘entertainment tax' in the State, making a DTH connection at least twice as expensive as cable connection. “This (Arasu) will only hamper the digital penetration in the State,” said a highly placed source in the industry.

DTH operators pay around 30 per cent of the revenue to the Government by way of licence fee and taxes, and 50 per cent to broadcasters. For example, if a subscriber pays Rs 135 a month, the DTH operator pays around Rs 40 to the Government by way of taxes and a little over Rs 65 to broadcasters. That leaves only Rs 30 with the operator.

With the average revenue per user (ARPU) remaining a big challenge for DTH operators, it will take years even to recover the subscriber acquisition cost (which is hovering around Rs 4,000) – and hence breaking even still remains a distant dream for them.

Besides, the Government has a very aggressive and, at the same time, addressable digitisation target in order to bring transparency in TV connections and declarations so that the share of revenue that is due to the Government and broadcaster will go up. Alongside, if the Government tax DTH platforms heavily and leave cable TV untouched, it will actually come in the way of achieving the target.

“We have to pass it on to the consumer, which will certainly slow down the digital platform's penetration in the State,” said Mr Harit Nagpal, Managing Director of Tata Sky.

Mr Sanjay Behl, Head of Reliance Digital TV, has similar views. The State-level entertainment tax in particular will certainly play a spoilsport for our growth plans in the State, he said.

Even though Arasu Cable is Government-operated, the last-mile connectivity is to be done by the LCOs, and hence ‘under declaration' of connection numbers cannot be ruled out, argued an executive of another major DTH player in the State.

Under declaration has been a serious issue as last-mile cable operators declare hardly 60 per cent (in many cases) of the actual number of TV connections they have given; hence leading to less revenue for pay channel broadcasters and the Government (by way of taxes).

Tamil Nadu has well over 90 per cent TV penetration, and hence it has become a key target market for DTH players. There are in excess of 1.6 crore C&S homes (cable and satellite connection). Though cable is a dominant player in this market, DTH platform has gained a considerable share of this – around 30 per cent; and Sun Direct is the market leader with over 70 per cent share of this segment.

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