Vikram Kaushik, direct-to-home TV provider Tata Sky’s Managing Director & CEO, is gung-ho that the DTH player will soon see robust growth in the South, devoid as it was, till recently, of a full complement of regional language programming.

Now with the full bouquet of Sun channels on its platform, Kaushik, who is quite aware of the impending competition from the likes of Reliance, the Bharti group and Sun, is confident that viewers in southern India will take to DTH television with gusto.

In Chennai recently to push the initiative, with hoardings all over the city to advertise the Sun channels on TataSky, Kaushik, who has had a long career in FMCG marketing with Hindustan Unilever, Britannia and Colgate-Palmolive, spoke to Brand Line on TataSky’s rapid growth and offers a perspective on the industry’s growth. Excerpts:

You expected to hit one million subscribers by this year end – are you on target for that?

When we launched on August 8 last year, when I was asked what are our targets, I had said if we do less than a million I would be very disappointed.

Actually, it was one of those brave comments you make when you launch a new business but we crossed one million connections on July 15, which is three weeks before we finished one year. And it’s been the fastest ever million in the history of the DTH industry anywhere in the world and that’s been very encouraging.

Equally, while we have done the numbers, we have done well in customer satisfaction, given the feedback, and that augurs well for the future.

We measured it through AC Nielsen with a national consumer satisfaction survey and we did so well on it that the guy actually called me back and said do you mind if I postpone the presentation by a week as we want to review the numbers. Then they came back and said Tata Sky has beaten all global benchmarks for customer satisfaction for the durables and DTH sector!

So, what parameters were you rated high on?

It’s on overall customer satisfaction; the installation process, the call centre, technology, picture and sound, suitability for the family, it’s an aggregate of all that. It’s vindicated our strategy that we will invest for the future and we won’t treat India as a lot of Indian entrepreneurs do – that is give the consumers a minimum and hope for the best – if they whine give them some more. You know that’s how a lot of companies have done their business in the past.

But, we decided between News Corp and the Tatas – the approach to be taken was to create a structural change in the pay TV market; I would go so far as to say that some of our technical equipment and software is the best there is in the world, even superior to BSkyB, DirectTV, Foxtel …

Now that you’ve hit the one million mark are you going ahead at this scorching pace?

What’s made this difficult for us, hitting the one million mark in the first year, is that we can’t do less than a million in the second! A lot of it will depend on how the market moves in this category and that too a new one such as DTH.

And the onus is on us, we’ve always looked it as category development, so a lot will depend on how the market grows. A lot of competitive activity will see the market grow. So, I see less than a million a year is not what we should satisfied with.

The industry has grown well. The broad brush picture is that the industry, including DD, which has been around for three years, and Dish TV, have between the three of us close to five million subscribers which is good by itself — but you need to recognise that if cable is at 67-71 million subscribers then it is not even 10 per cent — so it’s a long way to go. I think if it continues to go the way it is going and if the consumer realises that DTH is a superior way of receiving pay TV, I think 30 per cent of the pay TV market would going the DTH way is quite possible. The total TV households are estimated to be 115-120 million, which means 60 per cent of the total TV market is already cable and of that if we are 5 million it is 5 per cent of the market.

What’s been your experience in the CAS cities – is there a rapid shift to DTH from cable and set-top boxes?

We’ve seen a massive explosion when CAS came in those three cities (Delhi, Mumbai, Kolkata).

We prepared well for it – in sheer numbers the cable industry did get a bit worried and started giving away boxes and secondly the regulations indicated that consumers could pay for a single channel, a la carte and take a set-top box – the funny thing is that, and it’s a serious issue – CAS is meant to be the beginning of addressable television so there must be transparency and accountability, must be declared and that’s what DTH is – but the government has failed to create a level playing field between the addressable CAS regime and DTH.

Therefore that is something unnecessary; government agenda should be to provide a level playing field to all addressable TV systems , whether it is CAS or DTH or tomorrow there is IPTV or something.

Which regions of the country have contributed to your growth?

The largest contributor has been the North, followed by the West, then the South and then East. Interestingly, 45 per cent of the cable TV market lies in the South, and the absence of local content was not contributing 45 per cent of our growth. But, I anticipate this should change.

What about your investment plan, is it going as envisaged? Will you seek public funds at some point of time with an IPO?

It is going as per plan and the shareholders have indicated to me that if required they will back it further. It’s a 70:20:10, Temasek of Singapore has also invested 10 per cent _ 70 per cent is from Tata Sons while Temasek came in four months ago. There is no time frame for seeking public funds, the growth has been good and it’s a matter of timing and for the shareholders to decide.

Investment in the DTH business is on subscriber acquisition, which means all the costs incurred on marketing, distribution and also on promotions that you keep seeing. What we pay the content provider would be the largest, followed by subscriber acquisition costs, including subsidies on hardware.

How much do you intend investing this year considering you have a Rs 2,000-crore investment plan?

A bit difficult to say depends on what we do and how quickly we do it. This is the kind of business where the ARPUs (average revenue per user) are so low that breakeven is quite long and the payback is even longer – the ARPU of a platform like BSKyB is £40 a month, Direct TV Australian $60-70, in the region of Australian $ 80-90 and the ARPU in India is between £5-7, therefore B SkyB after 12 years is 8 million subscribers, Direct TV after close to 15-18 years is 14 million subscribers and when they heard that we did one million under one year it is evident that it is a volume game. So, therefore it is low ARPU, high volumes and therefore long payback and long gestation.

But low ARPUs here are also a function of the subsidies that you’re giving, isn’t it?

We subsidise the boxes, we subsidise some of the software, which is not easy but you have to do it. We are competing with cable here, so price is an important consideration.

Equally, we have to promote it in a way that works both for the consumer and the distributor.

What about the Sun TV offer of a DTH service for a monthly subscription of Rs 75 with a free set-top box and dish thrown in …would that affect you in any manner?

I think it’s a promotional tactic, it’s the early bird thing that everybody tries to offer. In this case before they have the service on the ground they have tried to lock in customers.

This is part of a marketing game and we are comfortable with playing that. Dish TV launched two-and-a-half years before we did and we’ve given it a run for its money all over the country.

Secondly, we are not selling boxes, we are selling a service, so it’s not enough to say that you can buy a box at a low price.

We think in any category giving products completely free is not a good idea because every business has to stand up and be viable.

Thirdly, if you look at the way Dish TV has performed even though it has consistently sold below our price by almost a third, it is very clear that the consumer in India has started to expect more and more of value rather than just price. It’s been shown across categories.