Latest order of the Telecom Regulatory Authority of India (TRAI) has dealt a blow to television channel broadcasters such as Zee Entertainment Enterprises (ZEEL), Sun Tv, others.
In fact, the TRAI has amended the new tariff order (NTO) and interconnection regulations.
This has given a rude shock to the broadcasting sector on the first day of 2020.
The new changes will have huge ramifications for the sector that had slowly begun to recover from the twin shocks of NTO in the first half of 2019 and the ad slowdown.
Faced with consumer criticism, the TRAI has decided to put a cap on the a-la-carte price of channels as well as place reasonable restrictions on the formation of bouquets.
The TRAI has also prescribed that distribution platform operators (DPOs) must provide 200 channels for a network capacity fee (NCF) of Rs 130.
The amended provisions will come into effect from 1st March 2020.
In its order the regulator stated that the twin conditions have been prescribed to address the issue of huge discount in the formation of bouquets by the broadcasters vis-a-vis sum of a-la-carte channels.
By way of data, the TRAI demonstrated that broadcasters are offering discounts upwards of 40% on bouquets.
By offering huge discounts, the authority stated that broadcasters are forcing consumers to opt for bouquets as popular channels are priced close to the channel cap of Rs 19.
This, the TRAI noted, impacted consumer choice.
While the new order will allow India’s cable TV users to access more channels at a lower subscription price but the move is likely to affect broadcasters and distribution platforms.
The Nifty Media index was trading lower on Thursday’s trade after TRAI order.
Share price of Sun TV slide over 2.5%, followed by Zee and Jagran, down 1% each.
On the flip slide, TV Today, Balaji Telefilms, TV18 Broadcast and Network18 gained 2% each, while Dish TV, Zee Media, Saregama and PVR were up in the media index.
Hence we expect that these changes effected are likely to impact margins of broadcasting and distribution players like zee sun dish and other dth players from FY21 onwards
While subscriber count will not be a issue the revised pricing will dent profit margins moderately going ahead hence the first half of FY21 may see profitability coming under pressure for players operating in this space ahead.
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