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Edited Transcript of DISHTV.NSE earnings conference call or presentation 14-Nov-19 12:00pm GMT

Q2 2020 Dish TV India Ltd Earnings Call

Dec 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Dish TV India Ltd earnings conference call or presentation Thursday, November 14, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Anil Kumar Dua

Dish TV India Limited - CEO & Additional Executive Director

* Tarun Nanda

Dish TV India Limited - Head of IR

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Conference Call Participants

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* Abneesh Roy

Edelweiss Securities Ltd., Research Division - SVP

* Ankur Periwal

Axis Capital Limited, Research Division - VP of Media and Logistics

* Jaykumar Doshi

Kotak Securities (Institutional Equities) - Equity Research Analyst

* K.G. Vishnu

JM Financial Investment Managers Limited - Equity Research Analyst

* Mayur Gathani

Ohm Stock Broker Pvt. Ltd., Research Division - Research Analyst

* Vivekanand Subbaraman

AMBIT Capital Private Limited, Research Division - Media Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Dish TV Limited Q2 FY '20 Earnings Conference Call. (Operator Instructions) I now hand the conference over to Mr. Tarun Nanda. Thank you, and over to you, sir.

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Tarun Nanda, Dish TV India Limited - Head of IR [2]

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Thank you. Good evening, ladies and gentlemen. Thank you for joining us today for the 2Q FY '20 Earnings Conference Call of Dish TV India Limited. To discuss the results and performance, joining me today is Mr. Anil Dua, the group CEO of the company; and Mr. Rajeev Dalmia, the Chief Financial Officer. We will start with a brief statement from Mr. Dua, and we'll then open the discussion for questions and answers. I would like to quickly remind everybody that anything that we say during this call that refers to our outlook for the future is a forward-looking statement that must be taken in the context of the risks that we use.

With that, I would now request Mr. Dua to address the participants.

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [3]

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Good evening, ladies and gentlemen, and thank you for joining us today for the second quarter FY '20 earnings conference call. I'm sure you would have had the opportunity to go through the results and the earnings release, both of which have been uploaded on the company's website. Subscriber additions were slow this quarter as the second quarter normally is. Also a not so robust macroeconomic environment, price undercutting by peers, along with residential flooding in many parts of the country put pressure on subscriber acquisitions and retention. Dish TV India Limited, however, chose to be resilient, making the best of every opportunity coming its way.

Setting aside the price undercutting resorted to by some peers in parts of the country, Dish TV India maintained a fine balance within the subscriber acquisition and the cost of such acquisitions. The company intentionally avoided adding extremely value-partial subscribers, ending the quarter with 42,000 subscriber additions at the net level. Total net subscriber base at the end of the quarter was [INR 23.94 million].

Financial performance during the quarter was a mixed bag, with the EBITDA margins strengthening further, while the absolute revenues and EBITDA remained on the softer side. Subscription revenue for the quarter was INR 7,920 million and operating revenue stood at INR 8,932 million. EBITDA for the quarter was INR 5,205 million, with a strong EBITDA margin of 58.3%.

As the government lays out the next round of measures for the economy, shifting focus to fueling demand and consumption, consumer optimism and willingness to spend should soon come back to normal. The onset of customers at the end of the second quarter worked well for normalcy in the coming months. Widening the portfolio of offerings for our subscribers, Dish TV India launched its much awaited smart-connected devices, comprising the Dish SMRT Hub Android set-top box and Dish SMRT Kit, a voice-enabled dongle with an Amazon Alexa powered remote, across 20 select locations in the country.

The company registered an encouraging response for both the next generation products and aim to address the existing subscribers with the Dish SMRT Kit, along with almost the entire market of broadband-connected houses with the Dish SMRT Hub.

These devices eliminate the hassle of switching between linear TV and OTT apps by effectively combining the 2 to a single entertainment device. With the launch of these devices, Dish TV India now has the best chain of connected devices, apps and services in the industry, enabling it to give more choice, quality and value to its customers.

With that, I would like to open the floor for the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Abneesh Roy from Edelweiss.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [2]

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My first question is on the price undercutting among peers that you mentioned. So this industry has seen massive consolidation and a very few players are left. So why still -- the undercutting happening in spite of slowdown. And you said Dish TV chose to be resilient, what does that mean? Did you mask the pricing or your pricing was still above the peer which you mentioned?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [3]

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Yes, I think 2 questions in last year: number one, the reason for price cutting despite the consolidation; and second is the civil response. On the first one, that is the fact. That is what you can see in the market. In the overenthusiasm post-NPO, there has been that kind of, I would say, a irrational price cutting by some of the players in the market. So we have been conscious to choose our response by market, to see if we are to match that and if we have to avoid that. And wherever we have felt that the quality of acquisition is going to be poor, we have avoided that, and that is what we mean by being resilient. And we have played along wherever we felt that is a genuine customer acquisition opportunity, leading to a genuine addition to the customer base, we have played along.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [4]

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And sir, -- these peers are the biggest threats or you're facing it from the cable players also?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [5]

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Mostly the peer players only because, as you know, that, especially in South India, there is a lot of undercutting by the dominant South Indian player and we had to match the prices that we include the government sales. So that led to reduction in the overall ARPU also, but we could not help because those are key market after our acquisition of revenue from a merger of Videocon. We have been -- we are quite strong in those 2 markets. So it continues for quite some time. Now normality is returning and the NCS is also dealt with, countered or returned as it was before 1 month.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [6]

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And this undercutting in North India is quite limited, right?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [7]

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Yes, North India was not too high because North India, we generally -- between 2, 3 players, which are mature enough to see the balance sheet for -- use them also. But it was primarily in the South India and some part of this annual in EBITDA for some time.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [8]

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So on subscriber addition, you have done [2.5] in first half. And in Q2, it was only 42,000. So you mentioned H2 expected to be much stronger, does it mean versus the full H1, you expect much stronger or versus Q2, which was very slow, do you expect to H2 to be stronger?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [9]

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So we do feel that both Q3 as well as H2 will be stronger than, respectively, Q2 and H1, because we think that festival yield -- general, better change. And certainly, Q4 last year was a weak quarter. So we certainly see that second half and quarter 3 are going to be both good.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [10]

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And the last question on the Dish SMRT Hub and SMRT Kits. So we are seeing already Amazon Fire Stake and the Google thing is anyway available, so what you are doing, what is the differentiation here? Is it being done because a customer wants this anyway, so it is more of hygiene that indeed some player would need to do? Or do you see a real differentiation in your own products, so you can get actually new customers from, say, 5 [cycles].

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [11]

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We see fundamentally here, if you see, while there's a lot of talk about these new devices in the larger ecosystem, but there is only a small section of the Indians who's actually generally able to afford them. This, with other offerings, we are actually making it available to a large base of patient d2h subscribers who, with their current boxes, can actually enjoy some of the video-on-demand experience by connecting their current boxes with us, sticks that we have that SMRT [triple H magnets] -- 3.82x, now we accept it on Dish. We've enabled their current boxes and the current TV is 2x smart and their ability to see both the linear TV through their traditional set network -- as well as watch video-on-demand as required. So this is something which is particular to our base, which only we can do with that kind of large subscriber base and attribute that fee evolution down the box set up.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [12]

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And so how is the subsidy for this because I think that the box will be new, right? You'll have to replace, customers will have to replace?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [13]

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No, that's the point I'm making, that people with existing set-top boxes can just get from us at a nominal price. The SmartSet, MagicSet, are not -- which are not voice-enabled, are at INR 5.99 and the voice-enabled set and that circuit is at INR 11.99. So you don't have to spend INR 84,000 to give them a new box, you can spend around INR 1,000 and have both results.

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Abneesh Roy, Edelweiss Securities Ltd., Research Division - SVP [14]

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But are you subsidizing because it's low price, or subsidy is quite limited?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [15]

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There is no subsidy on this, Abneesh. There is no subsidy.

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Operator [16]

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The next question is from the line of Vivekanand Subbaraman from AMBIT Capital.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [17]

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Can you help me with the -- a few inquiries on financials -- revenue [paid] and content cost that you paid out to the broadcasters?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [18]

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Overall pricing, it was quite around INR 585 crores.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [19]

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Okay. So it has come down from INR 602 crores in 1Q, right?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [20]

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Yes.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [21]

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Okay. And what about revenue slip?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [22]

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The revenue slip?

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [23]

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Yes.

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [24]

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Okay. The subscription revenue is INR 792. That is with our bandwidth target INR 35 and with the main -- and performance incentives around INR 36 -- and other operating income is INR 22 crores. Teleport income (inaudible)

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [25]

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If I may -- okay. I was asking whether the INR 22 crores also includes teleport income.

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [26]

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No, teleport income is not very well -- it gets back to [green.]

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [27]

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Sorry, sir, I couldn't get that. Can you repeat it?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [28]

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Teleport income is not there because it has to step back to[green] -- because we have been holding only on the [upper green] so now they are managing that piece of business.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [29]

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Okay. So it's rather pass through revenue 1 year, is it?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [30]

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Yes. Not pass through, we had a cost impairment, but the entire team is now busy. Now we're going to really sell.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [31]

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Okay. And the other thing, the enablement fee, which was around [INR 76 crore] in FY '19? And what is that number right now?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [32]

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We have determined a definitive plan on a month-on-month basic [treatment] -- and by March 2020, it will be at a level where both the parties are comfortable. And within that a [subsidy] of up to 90 days.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [33]

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Okay. Sorry, if I may ask the cash presentation has been pretty healthy in 1H FY '20. So why is it that we are not seeing money to -- I mean, why is the refillable issued through there, if I may ask?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [34]

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No, it is -- like I explained in the last 1 also, because the entire credit fee is now funded by us -- centers are unwilling to fund the LP after the buyer's trade was not allowed by [legal times] of India. So a large part of -- a large chunk of our money was invested in order to building the [product LP] system. That is our [inventory] also when talking the last quarter. And now when we are slightly competitive, we have started paying them the (inaudible). And it will be probably normalized here by March this year then.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [35]

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Okay. And then the inventory that I see in the balance sheet business, it's only around INR 24 crores? Or is it part of -- that (inaudible) INR 737 crores number?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [36]

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Inventory was around 1.4 million boxes.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [37]

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Okay. And what would the number be corresponding to that, the financial number in the value, please?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [38]

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We then multiply it by [23 15]

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [39]

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[23 15] Okay, understood. Okay. My second question is with respect to our cash flow generation and EBITDA. So before the merger, the pro forma FY '18 EBITDA was around INR 2,000 crores [at least exceeding rate]. And it's been almost 2 years since the merger. And the synergy that was being discussed, it doesn't seem to have to accrued in the numbers. Could you discuss of this based on what has the -- what has changed in the business that has resulted in the EBITDA being stagnant, more or less, over the last few years?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [40]

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The other development also after the merger right -- the IT origin -- the advent of OTT platform, [we guided] that is because our strong points where we had anticipated that we would be able to stay around INR 200 crores to INR 250 crores. It is not now the (inaudible). Then some of it was retained by the ForEx fluctuation or the rupee depreciation from the day of merger to date because some of our payments like (inaudible) system, set-top box, satellite, then many (inaudible) services and many other software details because we are [comparing with OTTR in dollar down] , so it is being reflected in the internal revenues in connection to. Though we are able to save money on account of call center employees, collection charges and some details (inaudible) less benefit. But the major part, which was supposed to be low is influenced by many macro factors or by regulatory factors, which was not [the forth] when we incurring to the merger deal and we would conclude it. So this is 1 of the reason why it is not being reflected. So we are on the path, but it is less on some -- something else which is sitting on EBITDA, more or less from center in the last 2 years.

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Operator [41]

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(Operator Instructions)

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [42]

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Is this better?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [43]

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Yes. Slightly.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [44]

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Just 1 small follow-up. Is there any area of saving, like, say, the transponder cost or something that is yet to play out that we had in recharge at the time of the merger? And also, right now, we are still running through transponders, right? Rather than the dish?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [45]

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The transponders, 18 months, never to the extend beyond the [10 22] But we cannot work on 1 transponder because then we would have to realign the pieces throughout the country. We tell you (inaudible) and cost associated with that. So the transponder will remain the same. The worst part in transponder is the parts fluctuation because we are paying the transponders on dollar terms and then we are withholding tax also. So we can't do much in transponder. We can definitely do in call center employees and we are moving very fast from either distributors, the SPA collection system to digital-based collection system wherein we can save 0.5% to 1% of the total revenue. So these are some of the items in our hands but definitely not the transponder [as on business.]

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [46]

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Okay. Understood. And last question is with respect to the recent case on the VR front with respect to license fee demand of the government that the Supreme Court granted. Do you think there could be a potential chance that the license fee basis, the government calculation, could there be a demand on that front also?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [47]

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First of all, in our license fee agreement that were signed by the company in 2003. There was no such thing like growth as in more adjusted growth revenue. It was simply mentioning that we didn't have to pay a license fee at the rate of 10%. And we were accordingly following the terms outlined in the licensing agreement and then came the TDSAT. That's when we're in TDSAT in 2010, we [saved] that. We can see the license fee, which is adjusted gross revenue that is gross revenue minus taxes minus front end work and minus some of the selling and distribution cost. So we started following that as an industry. But then the government went to the Supreme Court. And we are all in the Supreme Court but meanwhile, we went to high court. And high court is also figuring our disagreement and has said that we should maintain this setup, too, and pay at 32 [percent level]. So we are following that. The big news about the core part of the ACR -- or the ACR. Now as far as the interest and penalty is concerned, even in the case of the recently announced telecom investment, it was stated that the interest and penalty will be decided on a case-to-case basis.

Ultimately, in our end, it remained in the licensing part. There was no mention of any interest on the unpaid part of the license. So we are pretty hopeful that we will be vindicated about these assets. And let us hope -- also when the government comes, how we plan this effect.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [48]

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Okay. And the INR 3,400 crores worth provision, how much would be the principal amount and interest amounts, can you split that out?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [49]

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I mean INR 1,150 crores is the interest and balance in question.

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Operator [50]

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The next question is from the line of [Akash Shah] from EMS Securities.

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Unidentified Analyst, [51]

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I wanted to know how is the revenue from customer premise equipment get accounted.

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [52]

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Yes, after the implementation of India, it is the only basis of the performance of revenue on the basis of, the number of 3 months given 9 -- I'd say INR 32,000 -- and there is a bundling of 3 months of content. Then upper in there, we are approaching the contained part in 3 months, whereas before that, it was all in 1 go at the time of active economies. So to this extent our revenue less in the month of activation. And it is spread over the number of content even at the time of activity.

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Unidentified Analyst, [53]

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Okay. And which line item is this revenue is reflected in?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [54]

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It is included in the subscription revenue.

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Unidentified Analyst, [55]

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Okay. And what is the -- like, do we make any profit on this consumer prior premise equipment? Any economics on that?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [56]

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No, no. We are subsidizing it. The entire industry subsidy is around INR 1,200 to INR 1,500 per set-top box.

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Unidentified Analyst, [57]

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Even on the outright purchase, there is the subsidy?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [58]

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Yes. Most of it is through service model, these [prices], range. Outright purchase is very minimal.

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Operator [59]

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The next question is from the line of Jay Doshi from Kotak Securities.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [60]

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Can you explain us what is this INR 1,300 crores of other financial assets? And also, give us an idea of gross debt and net debt.

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [61]

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It was -- debt was around INR 1,900 or INR 1,800 and other than healthy and then year-end -- to the net debt is 1,700. We have paid INR 200 crores in the last quarter to the bank, and we have to pay around INR 600 more in the next 6 months. And these other financing asset is coming from last year, wherein there was an agreement between the time -- or and the timing for certain assets, which will be paid off when the amount is allocated to the assignment. And we hope that by March 2020, this will be brought to the minimum.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [62]

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Sorry, I didn't understand the final -- and if I may, aspect. So if you could sort of help me understand what that amount relates to?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [63]

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Like there were certain deals to contain to either at the time of MTU because we could not anticipate the amount to go to them. So we paid some money in advance to them, within other amount as the (inaudible). So that is how this amount remains [indiscernible] payable, and some of it is still payable. And -- but as on the [DEFINITY], the agreement raised between us and the 3 broadcasters, we are paying as per that plan, and it will gradually reduce and come to a minimum level by March 2020.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [64]

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So is other financial assets include advanced payable -- is actually advanced paid to broadcasters, did I hear it correctly? Or referring to other financial assets?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [65]

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Well, I'm also referring to that. (inaudible) into to the (inaudible)

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [66]

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Understood. And what should be -- what's the normal credit period that you get from broadcasters for content? Or it should be your normalized trade payables for INR 2,000 crores of content payments and your content payments of 2020 INR 200 crores, what should be the normalized -- I understand it's high right now, new seasons, but actually, otherwise a normalized number?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [67]

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Yes, always we'll suggest 90 days, but after then, we will -- probably broadcaster, said that they are not provide 90 days. So you can safely assume between 50 to 90 days average.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [68]

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It should -- ideally, it should be 15 -- INR 500 crores, INR 600 crores versus INR 1,600 crores right now?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [69]

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Right now, we did presume it is 90 days, but at least there are 2 of them taking away the -- we cannot be beyond 50 days. So maybe 75 days, you can take the ballpark figure.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [70]

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Okay. And finally, can you -- your buyers' credit used to be at least, as of March '19, was some INR 250 crores, INR 300 crores. So -- and you mentioned INR 1,700 crores net debt, excluding LC and bias credit. So what would be LC and bias credit?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [71]

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Yes, so LC will be INR 125 crores, which is biased rate on that now -- monetized rate and [watered] into LC. In '18, it will be around INR 75 crores.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [72]

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Okay. And what was this number maybe a year ago?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [73]

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A year ago, we only paid the LC. So we also had it quarter -- means 3 months purchase of CapEx and LC is what we used to get 90 days. So it used to be INR 250 almost.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [74]

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Right. So actually, if I were to -- the INR 250 crores of bias credit that bankers would want to give you at that point of time, it has maybe come down to INR 125 crores, so not a big...

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [75]

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(inaudible) in total was it's INR 900 crores because [after 90] that was converted into a loan. So I'm talking within LC and bias credit. LC was INR 250 crores but the files, it was the entire loan, which is depleted in the last 5 quarters, and now, we have only INR 125 crores LC and the balance is reflected in the loan amount. But we are not getting bias trade now because of the regulatory ban not allowing bias trade to anybody in the country.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [76]

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Understood. And the final one, does the Dish infrastructure, such as Dish Infra subsidiary approach that you took maybe 2, 3 years back, which has resulted in substantial reduction in the license fee that you've paid in the other principal that you've paid since then. Have you received any acknowledgment by the government or from the government body that they're agreeable to this arrangement? Or have they -- how does it work? So do they...

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [77]

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We have to file the audit report from the audit report which is usually need for the licensing -- license amounts, which has been done more in annual basis. And we continue to pay -- this is the Dish TV, this infra differentiation, there is no better issue from the department. Now of course, under the net accounting that we are doing as an industry for last 2 quarters, it is already taken care by the MPU because our turnover is already down in some cases INR 1,100 crores with maybe INR 3,800 crores to INR 4,000 crores but netting off the content was from the top line itself. And then when the [payability] of license income, it will be on the basis of the revenue, which is the reflected in the -- in Dish TV India.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [78]

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Right. But is there some form of confirmation that you received from government? Or can they come back to you a few years later or something else for the...

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [79]

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(inaudible) Can't be understand.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [80]

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Can they come back to you with a claim that this infrastructure arrangement was not acceptable to them? Or is not -- if I'm just (inaudible)

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [81]

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(inaudible) we had informal discussion with some of the [highers] in terms of [new deals.] So there was no such thing and now we started from quarter 3 2015. We are already 3.5-year old. So we don't anticipate, but the bigger part is the settlement of the licensing fees, which is pending before the Supreme Court.

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Operator [82]

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The next question is from the line of Mayur Gathani from Ohm Portfolio.

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Mayur Gathani, Ohm Stock Broker Pvt. Ltd., Research Division - Research Analyst [83]

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So you have payables to Z-Entertainment by March, you have a definite -- have given them, you have some payables, as you just mentioned in the other financial assets, plus you have INR 600 crores of debt to be repaid, so will we have sufficient cash flows in the next H2 to pay all this? Or we will have to increase our debt?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [84]

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No, we will be buying less of CapEx in the next 6 months. That is why we have built up the inventory to 1.4 million. We may be using until INR 0.7 million, INR 0.8 million. So INR 0.8 million will be carrying for the next year. And to that extent of the cash which can be [trapped] -- will be used for the payments -- payables to the trader. Of course, we have already earmarked the money, which is from the daily cash flow, for the debt figure.

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Mayur Gathani, Ohm Stock Broker Pvt. Ltd., Research Division - Research Analyst [85]

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And how much do you see is the debt figure at the end of March '20?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [86]

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It will be INR 1,300, INR 1,400.

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Mayur Gathani, Ohm Stock Broker Pvt. Ltd., Research Division - Research Analyst [87]

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And the net debt will be INR 1,300, INR 1,400, that means INR 600 crores will be paid as you just mentioned?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [88]

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Yes.

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Mayur Gathani, Ohm Stock Broker Pvt. Ltd., Research Division - Research Analyst [89]

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Okay, great. And what was the cash flow for the first 6 months, sir? Free cash flow?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [90]

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This quarter, free cash flow is minimal because of the [204] payout to the bank, but if you ask me, 6 months it will return to [INR 70,] INR 80 crores.

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Mayur Gathani, Ohm Stock Broker Pvt. Ltd., Research Division - Research Analyst [91]

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INR 70, INR 80 crores?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [92]

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On a net basis. Because of the huge loan repayment in the last quarter plus an LC repayment also.

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Mayur Gathani, Ohm Stock Broker Pvt. Ltd., Research Division - Research Analyst [93]

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Okay. So if you bought inventory, a higher inventory for this in the first half, so probably for the next year also, your cash flow should be extremely strong, sir?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [94]

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No, next year, our carry of inventory will be INR 28 million only, which is not very compatible. So we will have to build up. But by then, I think bankroll open up and we [will be applying for additional] CapEx.

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Mayur Gathani, Ohm Stock Broker Pvt. Ltd., Research Division - Research Analyst [95]

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Okay. And we will continue to maintain this EBITDA margins going forward? We can see some [increment] because you spoke about some savings that are still -- come in?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [96]

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But that is not reflected in the EBITDA margin. EBITDA will continue to be in this range. Rather, we are likely below the guiding -- the guided number. This according to which we should have been 38%, 39%, which is the old accounting. So -- but we are okay, we are 35%, 36%.

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Operator [97]

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The next question is from the line of [Pratik Barsagade] from Edelweiss Securities.

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Unidentified Analyst, [98]

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My question is on the dry announcement on capping the platform so in the detailed services, I just wanted to understand what percent of the business would be impacted in case this goes through? Or like currently, how -- what kind of viewership we are having on the owned platform services? So just wondered your take on this thing.

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [99]

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It is just a (inaudible) and it is a very small part of our value-added services, which is -- there is (inaudible) active services. Let us wait for the finality of it, and they are trying to restrict the number of [currencies to 15]. But it will involve -- there will be discussions, and we will present our viewpoint. We've already presented our viewpoint in (inaudible). So we'll find somehow compatible on an average of merely having the...

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Operator [100]

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Participants, please stay connected while we reconnect the management. We seem to have lost the line for the management. Please stay connected while we reconnect the management.

(technical Difficulties]

The line from the management is reconnected. Over to you, sir.

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [101]

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Yes. So do we have another question from Pratik or...

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Unidentified Analyst, [102]

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Yes, and just 1 more question. So what would be the comparable ARPU for this quarter?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [103]

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Yes, the ARPU we started [hearing after the maturity], so it will be [IND 110], [IND 115 crores].

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Unidentified Analyst, [104]

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[110], [115] okay. So that would be calculated, but -- I mean I think last quarter, you had given a comparable number also of 200. So do you have this?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [105]

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That will be [IND 200 crores] to [IND 205 crores].

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Operator [106]

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The next question is from the line of Vishnu K. from JM Financial.

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K.G. Vishnu, JM Financial Investment Managers Limited - Equity Research Analyst [107]

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Just wanted to know, what is the growth side of subscribers for this quarter?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [108]

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Growth was slightly lower -- flat.

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K.G. Vishnu, JM Financial Investment Managers Limited - Equity Research Analyst [109]

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And the total CapEx?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [110]

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[1 75] for the box set.

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K.G. Vishnu, JM Financial Investment Managers Limited - Equity Research Analyst [111]

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[1 25] for the box sets. Okay. So what would be the CapEx guidance for the year?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [112]

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Not more than [700] because we will probably reduce the CapEx in the next 2 quarters and do only the CapEx for the [heading] and save money for the set-top box because we already are paying them through.

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K.G. Vishnu, JM Financial Investment Managers Limited - Equity Research Analyst [113]

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And regarding EBITDA, I mean, is the EBITDA guidance the same versus the previous quarter?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [114]

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As we currently, more or less INR 2,100 upwards to maybe INR 2,200 but not beyond that. This is the current strength that we see in the rural area, movement that is listed on that sentiment wise, we will have better ARPU and EBITDA per package selected by the majority of our subscribers.

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K.G. Vishnu, JM Financial Investment Managers Limited - Equity Research Analyst [115]

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And just a last one, sir. I mean what is the licensee provision for this quarter?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [116]

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This quarter, I can't say, but in totality it's in high-teens.

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K.G. Vishnu, JM Financial Investment Managers Limited - Equity Research Analyst [117]

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No. I mean the P&L provision, sir.

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Unidentified Company Representative, [118]

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No, no, we're not interested in P&L provision for license fees (inaudible) .

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [119]

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We will let you know, maybe you can come after some time.

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Operator [120]

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The next question is from the line of Vivekanand Subbaraman from AMBIT Capital.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [121]

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My question pertains to the large markets. Now we saw that the broadcasters has pulled off their channels from TV, Free Dish. So logically -- I mean the older consumers who are accustomed to watching pay content, some of them should have shifted to pay DTH, so -- and secondly, you also had independent TV which had around a million customers, then more or less shutting down services. So what are your gains in the north markets? You mentioned about the stress in the south markets, so can you talk a little bit about the market, comparing north versus south.

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [122]

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Well, you see, certainly, these were opportunities truly mentioned, and that's why that [2.5] record net gain captures that, but, of course, we would have loved it to be much higher. But the fact of the matter is that we tried the elasticity of the customers in rural areas. To pay at least INR 153 or even an [FTA path] for something which -- we have been used to seeing it absolutely free, of course, is something which not a very large number of rural customers are willing to pay.

So since the Free Dish platform does carry a lot of other channels and even [the vacants got of course] substituted for other channels. It's not a lot of rural customers, I think, have adjusted to that new package and have not come [in the kind of homes] that we might have expected them to come out here. But yes, there have been gains. There's no doubt about it. We have gained a fair bit in north and in other markets where Free Dish was strong, but as was mentioned earlier that it's also offset a little bit by some of the price competition elsewhere, where we decided not to really participate and do a quality acquisition.

But net-net, as a result of that, we have some net adds this year, and we are hoping that with consumer sentiment improving, going further, we can still capitalize a little more on the same opportunity.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [123]

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Okay. And can you talk bit more about the south markets? What is the differential in the consumer pricing in the south market? Also another question that I had in my mind was with respect to the -- to what the customers are paying now for CNVO now that things have stabilized. What is the consumer spend on DTH services and pay for TV services compared to the pre-NPL deal?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [124]

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So on the south market, you asked me the price points. We have -- of course INR 153, but there are paid packs, so available in the market from other players here, in the region of INR 150. Whereas our paid packs are in the region of INR 200, so INR 200-plus. So that's the difference, and that's what we have been mentioning. As far as the overall 3 NPL versus 4th NPL scenario's concerned, as was said a little earlier in the urban areas, well, you see more people who have been able to choose a lower price point, and we have [premium] channels that they wanted. And the very rural areas that might have been a little bit of increase in terms of price point. But overall, the net impact on ARPU has -- which as [Aria] just mentioned, has been flattish to downward. So that's on PNT or (inaudible) every person has founded price equivalent, either choosing fewer channels at a lower price or more channels at a slightly higher price. One of the figures that I remember every quarter, that I admittedly -- I don't have the latest update, but we had seen a few months back that about 40% of the base has chosen a higher price point and [about] 60% of the base has chosen a lower price.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [125]

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Okay. And what percentage of your customers are on south [pack?]

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [126]

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So there are 22 brands -- the number is like 24%, 25%. I'd say 24% or so.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [127]

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And what about the active HD customers, what percentage of these comprises that?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [128]

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Active will be around 18% to 20%.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [129]

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18% to 20%. Okay.

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Operator [130]

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The next question is from the line of [Akash Shah] from EMS Securities.

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Unidentified Analyst, [131]

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In the annual consolidated P&L, there is revenue from infra support service, like what is this revenue relating to?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [132]

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It is for the activation of set-top boxes.

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Unidentified Analyst, [133]

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Activation of set-top box, which you spread over the duration of the contract?

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Operator [134]

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Members of the management, we can't hear you.

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [135]

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Hello? Yes, we are able to hear you.

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Unidentified Analyst, [136]

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Yes, hello?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [137]

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Yes, please.

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Unidentified Analyst, [138]

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Yes. So do they use credit or what -- like what period of months?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [139]

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Generally, about 50% of the pack that is still -- we all provide is the 1-month. [Trading] is only when it is bundled for 3 months or 6 months.

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Operator [140]

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The next question is from the line of Jay Doshi from Kotak Securities.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [141]

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Is it reasonable to assume that other financial assets and trade payables will offset each other to a large extent by end of this year?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [142]

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Yes, absolutely.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [143]

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So where do you expect your trade payables to be as of March '20 and other financial assets as well?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [144]

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We'll remain 400 or 500.

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Jaykumar Doshi, Kotak Securities (Institutional Equities) - Equity Research Analyst [145]

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Okay. So it will come up by INR 1,000 crores or more than -- and just likewise, other financial assets have also reduced to the INR 200 crores, INR 300 crores, which it used to be earlier, right?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [146]

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Absolutely.

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Operator [147]

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(Operator Instructions) The next question is from the line of Ankur Periwal from Axis Capital.

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Ankur Periwal, Axis Capital Limited, Research Division - VP of Media and Logistics [148]

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Just a clarification. Now we did mention that we know the DD Free Dish for '20, there have been a decline in their subscribers. If I got you right, there are still some subscribers who are on DD Free Dish, but [they're] still watching may not be those channels -- [by what cases] you talked about earlier, but some other [side B] channels, is that right?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [149]

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Yes, though they came down for some time, but what we see is this because of the rural distress. Again, there is a rise in the number of [reduce] because I see some of the guys in that area now are okay with whatever is coming. It could be on [that call,] whatever is coming they are happy. So once this rural distress [is real now], goes off, then they will switch to pay DTH or maybe they will subscribe to pay DTH (inaudible) set-top box, either [of these 3] or any other operator or (inaudible) it is up to them.

So like earlier, it used to be still 24 million, 25 million, it came down by 1 million or 2 million. But now again it has reached to 24 million, 25 million, 26 million.

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Ankur Periwal, Axis Capital Limited, Research Division - VP of Media and Logistics [150]

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So the net reduction has been only 1 million, that's it?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [151]

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No, 2 million. Because most of the guys who need this Free Dish -- beyond the 10%, 15%. For them, whatever is their level, they are okay. They are okay with the news, they are okay with the regional entertainment or channels, which [are not based,] and you have high system channels still in the DD Free Dish. They are okay.

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Ankur Periwal, Axis Capital Limited, Research Division - VP of Media and Logistics [152]

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Sure. And as far, out of the 24 million all-in-all net subs that we have, how much will be HD because in between, we did had -- we were trying to push HD incrementally. So any thoughts on that?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [153]

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Yes, we had around 18% to 20% HD, but now we are slightly less putting on SD because at the new box, we are okay. But replacing the old box with a new digital box, the subsidy was quite high. But if anybody wants to buy HD, they are welcome because the price difference between the SD and HD is now very minimal. But earlier in the last 3, 4 years, we used to replace at a very nominal side, so we created a new subsidy on 2 accounts: one was when we provided the SD box; and the other was when we provided the HD box. That year was slightly less.

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Ankur Periwal, Axis Capital Limited, Research Division - VP of Media and Logistics [154]

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Sure. And will be fair to say that 1.3 million, 1.4 million subsidied -- sorry, set-top boxes that we have. A majority of that will be HD only?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [155]

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Yes, yes, yes. Because now it is whatever we buy, it is mostly HD. And we have 1 HDMI cable [at ET] that can be converted into HD box.

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Ankur Periwal, Axis Capital Limited, Research Division - VP of Media and Logistics [156]

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Sure. Sir, 1 more thing on the depreciation part. Now if I remember it right earlier, you did -- you had mentioned that there was an accelerated depreciation. You were taking care of the older inventory, writing off the top boxes which are inactive for long. But this depreciation number has not been coming down. Any specific reason? Is there a change in policy there? Or is that acceleration still continuing?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [157]

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No. After India, we accelerated the -- I mean, not applicable. But we must also remember that this depreciation figure also reflects the depreciation in the rupee. So to that trend, the sectors for which we are financed by the foreign currency loans, we have to align it with the currency rate. It is very fast. Whatever (inaudible) around 7% to 8% that we see is on -- of the rupees is happening every year. So apart from the normal wear and tear, which is 20%, [it was not a factor].

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Ankur Periwal, Axis Capital Limited, Research Division - VP of Media and Logistics [158]

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Sure. And sir, just 1 last clarification, if I may. Now that trade payable that we have, it is largely content costs?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [159]

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Content costs to 1.5 months of transponder from general administration. And maybe 1.5 months, 1 month of call center.

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Ankur Periwal, Axis Capital Limited, Research Division - VP of Media and Logistics [160]

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Sure. And the other financial assets, which we were discussing earlier as well. This is -- you mentioned, is advanced for content, what do you have?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [161]

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This is exclusively for content only, there is no reduction of call center or a general administration of transponder in the financing [later.]

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Ankur Periwal, Axis Capital Limited, Research Division - VP of Media and Logistics [162]

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So if I got it right, there are certain cases where we have an advanced content coming? And there are certain cases wherein the credit period for content is probably much higher?

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Anil Kumar Dua, Dish TV India Limited - CEO & Additional Executive Director [163]

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[Normally. Stands that way.] There is an agreement between a third party and the (inaudible) wherein unpaid part of the content, which was mainly coming because of the onset of the MTU was put into a separate account, and now that has been depleted on a month-on-month basis, then there's clarity in booking area at how much was [stable], what was the rate applicable, how much discount we are getting, and how much incentive we are eligible for. We are sitting right now, I say to that, we have a definitive plan of repayment for key broadcasters. But by the end of this financial year, we should have the minimum of trade payable and minimum of these financial assets, maybe INR 400 crores, INR 500 crores.

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Operator [164]

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That's the last question in queue. I would now like to hand the conference back to Mr. Tarun Nanda for closing comments.

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Tarun Nanda, Dish TV India Limited - Head of IR [165]

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So thank you once again, ladies and gentlemen. We'll soon have the transcript of this call on our website, www.dishtv.com. We look forward to speak to you again. Thank you, and have a great day.

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Operator [166]

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Thank you very much. On behalf of Dish TV India Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.