RCom likely to shut down Reliance Digital TV next month

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Purported advertisement

Reliance Digital TV, the DTH arm of the Anil Ambani Group, is scheduled to shut down next month, according to the photo of an advertisement that allegedly appeared in a regional newspaper.

The DTH service has around 5 mln (50 lakh) subscribers.

“This is a notice to all subscribers of Reliance Digital TV,” the advertisement says. “Since our license is expiring, we will be shutting down our DTH service across India on Nov 18.”

The advertisement, whose veracity has not been confirmed, further urges subscribers to make alternate arrangements to continue to watch their favorite channels.

On being asked whether the company had indeed taken out such an ad, a Reliance Group spokesperson said the company will respond tomorrow (Monday).

Calls to the company’s customer care are not getting answered, and are met with a pre-recorded message saying that the call cannot be attended due to ’emergency conditions’.

Several channels that were transmitting on the platform have also become unavailable.

FINANCIAL PROBLEMS

Reports of a potential shutdown comes in the wake financial troubles at Reliance Communications, which owns Reliance Big TV which runs the DTH service.

At least two vendors who provide services to RCom have filed insolvency proceedings against the company, Ericsson and Tech Mahindra.

Reliance Big TV started DTH operations in 2008, and was given a 10-year license in 2007.

That license is set to expire soon, forcing the company to re-evaluate its options.

DTH operations are a costly affair due to the expenses involved in leasing satellite spectrum and paying broadcasters for content.

Spectrum alone is likely to cost Rs 80-100 cr per year for a player like Reliance Big TV.

Other expenses, such as customer care, distribution and hardware are also substantial.

However, RCom has been gradually scaling down these operations over the last few years.

It has also not slow in expanding into HD, unlike other competitors. Even Sun Direct, which shares spectrum with RCom, has been aggressively expanding into HD in recent months and has 60 HD channels now.

Despite such odds, it would be disappointing for investors to see the company shut down the service instead of sell it to another player.

For example, even if a player like Sun Direct was to buy the subscribers at Rs 500 each, the company could generate proceeds of a few hundred crores of rupees.

At present, DTH companies spend between Rs 1,000 to Rs 2,000 to sign up a single subscriber in the form of direct acquisition costs. This is in addition to the money they spend on advertising.

Moreover, Sun Direct already depends on Reliance Digital TV for transmitting dozens of its standard definition channels and can make a seamless transition for RDTV customers on to its network. Rcom had, in June, said it was looking at selling the DTH business.

Perhaps anticipating a disruption, the Chennai-based DTH player has been shuffling its channels in recent days. It has also started migrating its HD channels into HEVC mode to make space for transmitting additional channels.

Some of the space freed up has been utilized by Sun Direct to beam standard definition channels.

According to sources, Sun Direct is moving those channels that it was depending on RCom for, to its own transponders in anticipation of a shut down of RDTV.

Both DTH services use the same satellite — Measat 3, and channels can be moved from one network to the other without requiring any intervention at the user end.

RCom fell on hard times due to the emergence of 4G technology, which made its CDMA-based data services uncompetitive.

The company also shut down its CDMA voice service to sell much of the spectrum to Reliance Jio, a new 4G operator led by Mukesh Ambani, brother of Anil Ambani, the chairman of Reliance Communications.

TIP: The advertisement was brought to our attention by Adithya Vikram.

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