Cable network operators and DTH players have much to be disappointed about as, contrary to expectation, the duty on imported set top boxes has been increased from 5 per cent currently to 10 per cent.
The stock price of Dish TV, Hathway Cable and Den Networks fell by 1-10 per cent on Thursday, reacting to the increase in customs duty. While some of the staged a marginal recovery on Friday, Hathway Cable remained weak.
There was also no reduction in the license fee for operators.
The likes of Hathway Cable, Den Networks and DTH service providers such as Dish TV, Tata Sky, Airtel Digital and Videocon will now have to pay more for the set top boxes that they import. The price of a set top box is normally around Rs 1,300. If this goes up, the subscriber acquisition cost would rise from the current Rs 2,200-2,500 levels by another 5-7 per cent.
Although the budgetary move to raise duties is aimed at promoting local manufacturing of set top boxes, the digital cable business is heavily dependent on imported boxes. According to news reports and industry body Consumer Electronics & Appliances Manufacturing Association (CEAMA), in Phase 1 and 2 of cable digitisation (covering metros and Tier I cities), 95 per cent of the set top boxes were imported.
Around 26 million set top boxes were reportedly demanded in these phases. It may be challenging for local manufacturers to quickly scale up in the future, and more specifically for countrywide digitisation of cable networks by March 2014.
The CEAMA has also indicated that imported set top boxes (mainly from Chinese vendors) were a tad cheaper than locally manufactured ones.