Nomura Equity Research on the media sector believes that that the initial seeding of STB by cable operators, which has not been backed up by proportionate increase in service infrastructure, will mean that a significant part of these subscribers can still churn away to the DTH industry in the medium term
As per the latest data release by the ministry of information and broadcasting (MIB), between 1 March 2013 and 12 April 2013, multiple system operators (MSOs) have seeded 4.45 million set-top box (STB) compared to 0.38 million STB seeded by direct-to-home (DTH) players. This highlights that, in the short term, MSOs have gained more market share versus the DTH industry which is now focussing on profitability (package price increase), cash flows (reducing subsidy on STB) and adding “value conscious” and not “price conscious” customers, which will impact churn positively.
Dish TV increased the price of its STB in February, which was followed by similar action from other players like Tata Sky in February. While some of MSOs have also increased prices (Den Network increased the price of its STB by Rs200), but clearly the differential versus DTH has increased as the DTH companies choose to position themselves as an “upgrade option”.
Nomura Equity Research in its Quick Note on the media sector believes that that the initial seeding of STB by cable operators, which has not been backed up by proportionate increase in service infrastructure, will mean that a significant part of these subscribers can still churn away to the DTH industry in the medium term.
Nomura expects Dish TV’s reported ARPU in 4Q to improve to Rs161.8 (versus Rs160 in 3Q and Rs159 in 2Q). The brokerage has factored in the following impact to arrive at this number:
Package price increase of July 2012 to be reflected partially in 4Q ARPU—The company hiked the price of its non-south pack by Rs20 in July 2012 which has been partially captured in 2Q-3Q ARPU. Nomura expects its effect to be visible in 4Q as well (building in Rs3 increase in 4Q).
Lower number of days in 4Q—As per the company, billing to customer is done on per day basis. Since 4Q will have two lesser days than 3Q (as February 2013 had 28 days), reported average revenue per user (ARPU) will be depressed by around 2.2% compared to 3Q assuming everything remains same.
Removal of free one-month subscription period for new subscribers—The company has removed the one-month free viewing period on purchase of new connection from February 2013 end (at the time of its latest STB price hike). This would have a positive impact on ARPU.
Content negotiation for FY13 between Dish TV and Media Pro was partially (around 27% as per Nomura’s estimate) completed in 3Q. The brokerage expects the negotiation to be complete in 4Q and, therefore, as in 3Q, Dish TV will pay increases pertaining to prior
FY13 quarters as well in content cost to Media Pro in this quarter.
On other hand, Zee Entertainment has not yet accounted for any incremental revenue from increase in content cost post partial competition of negotiation between Media pro (JV between Zee and Star) and Dish TV in 3Q. Nomura analysts expect Zee’s subscription revenue to be boosted in 4Q as the company will retrospectively capture increase in content revenue from Dish TV.
The brokerage expects no major surprises in the Dish TV results except that subscriber addition will be lower given that it took a lead in increasing the set top box price:
Content cost increase—Assuming 12% y-y increase in content cost as guided for FY13, the brokerage expects content cost to increase by around Rs693 million in 4Q y-o-y.
ARPU—Nomura expects the company to report 4Q APRU of Rs161.8 as it factors in the remaining impact of the July price increase, impact of fewer number of days in February and removal of one-month free subscription period for subscribers in February.
Subscriber addition—As highlighted above, STB price increase will mean subdued subscriber addition in the short term for DTH players. Nomura expects Dish TV to add 0.35 million subscribers in 4Q (versus 0.8 million in 3Q).
Strong growth in subscription revenue to continue—The brokerage expects Zee’s subscription revenue to be boosted (it will get around Rs391 million based on Nomura’s assumption of around 40% market share ) in 4Q from increase in content cost post negotiation between Media Pro and Dish TV which Zee will book retrospectively for FY13 in 4Q. In 4QFY12, Zee captured July 2012-March 2013 (nine months) revenue from Media Pro of Rs506 million. Adjusted for July 2012-Dec 2012 revenue in 4QFY12, it expects Zee’s domestic subscription revenue to grow by nearly 30% y-o-y in 4QFY13.
Management has indicated increased losses in the sports business in the quarter—In 4Q, Zee broadcast the South Africa-Pakistan (3 Tests, 5 ODIs and 2 T20s) and South Africa-New Zealand (2 Tests, 3 ODIs and 3 T20s) cricket series which will lead to higher losses in the sports business. The brokerage is building in around Rs435 million loss in sports business in 4Q.
Steady growth in advertising—The brokerage expects advertisement revenue to grow by around 15% driven by a combination of robust advertising spend especially by FMCG companies, and uptick in advertising revenue from sports.
The demerger does not in any way change the prospects of Wipro and shareholders should chose the option to get shares of a known entity that is listed on the stock market
Azim Premji-led Wipro has come out with its share sale through offer for sale (OFS) route, following approval from the Karnataka High Court and market regulator Securities and Exchange Board of India (SEBI). Wipro, India’s third largest software company, had announced that it will demerge its non-IT businesses such as consumer care and lighting into a new company and focus exclusively on IT. The board of directors approved the demerger of Wipro Consumer Care & Lighting (including Furniture business), Wipro Infrastructure Engineering (Hydraulics & Water businesses), and Medical Diagnostic Product & Services business (through its strategic joint venture), into a separate company. Wipro will remain a publicly listed company focussing exclusively on information technology. Last year in December, its shareholders had approved the scheme of arrangement between Wipro (demerged company), Azim Premji Custodial Services Pvt Ltd (resulting company) and Wipro Trademarks Holding (trademark company). The scheme was approved by the Karnataka High Court in March 2013.
The “resulting company” is a private limited company whose equity shares are not listed on any stock exchange. It proposes to carry on the diversified non-IT businesses after the effective date.
Under the scheme, each holder of equity shares of Wipro shall be entitled to receive equity shares or redeemable preference shares in the Resulting Company as follows:
(i) Resident shareholders of Wipro can choose from the following options: receive
(A) One share with a face value of Rs10 of the Resulting Company for every five shares of Rs2 each of Wipro held by such shareholder,
(B) One 7% redeemable preference share (RPS) with a face value of Rs50 of the Resulting Company, for every five shares of Rs2 each of Wipro
(C) One share of face value of Rs2 each of Wipro from transferring promoters in exchange for every one and sixty five hundredths (1.65) shares of the Resulting Company
(ii) Non-resident shareholders of Wipro, excluding holders of Wipro ADSs, shall receive
(a) One share with a face value of Rs10 in the Resulting Company for every five shares of Wipro held by such shareholder and
(b) One share of face value of Rs2 each of Wipro from transferring promoters in exchange for every one and sixty-five hundredths (1.65) shares of the Resulting Company
What should you be doing if you are a Wipro shareholder?
While TK Kurien, CEO, IT Business and executive director claims that “Creating a technology-focused company will allow us to better serve the needs of our customers, and accelerate investments necessary to capitalize on market growth opportunities”, you must remember the demerger does not in any way change the propspects of Wipro.
Suresh Senapaty, CFO and executive director, Wipro says, “The businesses of Wipro Enterprises are diverse, and this demerger gives them an opportunity to pursue their independent growth plans. I believe the demerger scheme reflects a high standard of governance, transparency and fairness for all stakeholders”. Once again, this will not change the prospects of Wipro.
According to us, Option A is the worst of the lot. Here is why…
1. You will be stuck with the shares of an unlisted company, which may not be the best in its field.
2. The “Resulting Company” itself will be a diversified company. What is the connection between lighting, soap and medical equipment? None.
3. This the also less profitable part of the business. The IT business contributed approximately 86% of revenue and 94% of profit, before interest and tax.
Option B is no better because you are getting only redeemable preference shares, which will be converted into the shares of the unlisted resulting company at an unkown valuation at a future date.
Option C is the best option. You get the shares of a known entity, listed in the stock market. You can exit when you want to.
Now, here is the final suggestion. Either now or later (after you have got more shares of Wipro under Option C), sell them and buy shares of TCS. TCS has a much better exposure to the IT sector than Wipro, which is struggling to grow.
A Russian with history of duping several gullible people in Russia and the US is spreading his “mutual mutual aid fund” idea called, MMM India. This is nothing but a pure money circulation scheme
Mavrodi Mondial Moneybox India or MMM India, a multi-level marketing (MLM) or a Ponzi (pure money circulation) scheme set up by Sergei Panteleevich Mavrodi, a Russian businessman and financier, is spreading its wing in India, especially in rural areas. According to Wikipedia, in 2007 Sergei Mavrodi was found guilty in a Russian court of defrauding 10,000 investors out of 110 million roubles or about $4.3 million. But more about Mavrodi and his businesses later.
MMM India, the Ponzi scheme says it is neither a company nor a business but a mutual mutual aid fund. In simple words, it takes Rs5,000 from you, gives you 100 units of some virtual currency called Mavro. When you bring two more people, you would receive 20 Mavros in your e-wallet. The new member also deposits Rs5,000 in the old member's account, thus your ‘investment’ is repaid. Virtually, because the cash is converted into Mavros in your e-wallet and then there are ‘minor’ terms and conditions, which makes it difficult to get your real money back.
The MMM scheme mandates all members to keep at least 100 Mavros in their account. That means your Rs5,000 are locked permanently in air. This is because MMM is neither a company nor a business as it operates only through the internet. This helps the double your money scheme to avoid all kind of legal permissions and regulations. MMM likes to call itself an international, free, self-adjusting community or social virus. Unfortunately, it is nothing but a money-gobbling virus.
According to Who.is data, MMMIndia.in is registered by Ivan Ivanov from Petrozavodsk, Russia and the domain would expire on 11 July 2014. Its DNS record shows that mmmIndia.in uses an ID address 18.104.22.168 located in Moscow.
MMM India is nothing but a pure money circulation scheme that works on enrolling new members. The moment there are no new members, the scheme collapses. A new member pays money (here virtual money!) to the old member and it is repeated infinite times.
Two basic questions need to be answered. One, in the end who controls the 100 Mavros, or Rs5,000 that the member needs to keep in his virtual account? And second, if the idea of virtual money or mutual mutual aid fund is so great, then why the government or Reserve Bank of India (RBI) is not implementing this? Why such a great novel (!) idea needs to be sold through chain marketing route instead of customary marketing system that has served human society for thousands of years?
In short, strictly stay away from MMMIndia and it is bound to vanish sooner than later.
Coming back to MMM's founder and ‘brain’ Sergei Mavrodi, on 22 December 1997 declared MMM as bankrupt and disappeared. He was on the run until his arrest in 2003.
While on the run, in 1998 Mavrodi created Stock Generation (SG), a classic pyramid scheme presented as a “virtual stock market game”. However, its game was over once it caught attention of the US Securities and Exchange Commission (SEC). In 2003, the SEC obtained permanent injunctions against SG. Mavrodi was then placed under police custody. He was convicted of holding a fake passport and was sentenced to 13 months in prison. On 22 May 2007, Mavrodi left prison, having served his full sentence.
On 28 April 2007, the Moscow court sentenced him to four and a half years in a penal colony (a settlement used to exile prisoners and separate them from public). The court also fined him 10,000 roubles or about $390.
In January 2011, Mavrodi launched another pyramid scheme called MMM-2011, asking investors to buy so-called Mavro currency units. He frankly described it as a pyramid, adding “It is a naked scheme, nothing more ... People interact with each other and give each other money. For no reason!” In May 2012, he froze the operation and announced there would be no more payouts.
In 2011 he launched a similar scheme in India, called MMM India, again stating clearly that the vehicle is a pyramid, says Wikipedia. Looking at the past record of Mavrodi and his money multiplier schemes, you do not need an astrologer to tell about the future of MMM India. This Ponzi from Russia only loves your hard-earned money, unless you are a super spy like the 007.