Why did Warburg Pincus buy stake in Bharti Airtel’s DTH business?

The enormous scope for DTH players to improve and expand biz might be a reason

The stock of Bharti Airtel traded flat on Wednesday despite the stake-sale in the company’s DTH business to private equity firm Warburg Pincus. The news was announced the previous evening. Bharti Airtel does not have much to lose as it will continue to hold a significant stake in the growing DTH business after the sale and the proceeds of the sale can come in handy in future.

Warburg Pincus is paying ₹1,624 crore for 20 per cent stake in Bharti Telemedia, the DTH arm of Bharti Airtel. While Bharti Airtel will sell 15 per cent of the stake, 5 per cent will be divested by another company in the Bharti group.

It is not difficult to see why Warburg Pincus is purchasing this stake. As the digitisation of cable television is still under progress, there is scope for the DTH players to improve and expand their business operations considerably. In the television content distribution industry, DTH has 33 per cent market share while the digital cable constitutes 29 per cent, with the remaining 38 per cent dominated by analogue cable. Bharti was the third-largest player in the DTH segment with 21 per cent market share in June 2017, according to TRAI.

DTH players such as Bharti Airtel have also adapted well to the changing viewer preferences by providing Internet television along with its digital television services, which is likely to pick up in the coming years.



DTH business



The DTH arm of Bharti Airtel, launched in 2008, has been clocking good growth in recent times.

For the quarter ended September 2017, this business reported a revenue increase of 10 per cent year-on-year to ₹936 crore and the reported EBITDA margin improved to 37.5 per cent in Q2, compared to 35.5 per cent in the corresponding quarter last year.

Though its customer base has improved to 1.3 crore as of September 2017, from 27 lakh in March 2008, the average revenue per user (ARPU) has increased at a slower pace.

For Q2 FY17, the ARPU stood at ₹233, while for the same period last year it was ₹232. That said, the company performed better compared to the leading player in the market, Dish TV; the ARPU for this company declined 5 per cent to ₹154 for FY17 from ₹162 last year.

However, Dish TV is the market leader with 24 per cent market share, followed by Tata Sky with 23 per cent and Bharti Airtel with 21 per cent market share. State broadcaster Doordarshan too has joined the field, providing DTH services.

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