Shubham Majumder of Macquarie Research is bullish on the DTH space and believes that it will grow at a CAGR of 60-70% for two-three years. He said that the DTH space could mimic the growth of telecom space. According to him, Dish TV remains the clear leader in the DTH space now. He expects Bharti DTH Services to launch in September-October timeframe.

Excerpts from CNBC-TV18′s exclusive interview with Shubham Majumder:

Q: What is the level of interest you have seen in media because it has been absolutely rangebound and sideways over the last many months?

A: The interest level in these sectors was pretty high. We had about 75-80 investors from overseas as well as from India attending the three-day Conference on telecom-media-internet we hosted in New Delhi last week. We had 31 listed and unlisted companies including the regulator, media buyers and consultants present at the conference as well. The mood was buoyant from the companies.

Q: Did you sense any apprehension on part of the companies about the sluggishness that we are seeing in the economy and how that could hurt advertising revenues going forward or do you remain optimistic as a house on print or television media stocks?

A: There was some sense of a slowdown relative to what forecast or outlook companies were giving six months back. UTV was a counter consensus with the view that advertising growth is going to be very modest in 2008 or fiscal year March 2009 while the other media companies that were present including the Zee Group, NDTV and the others were upbeat on advertising revenues. To that extent, there are mixed signals coming out from various companies that were there at the conference.

Overall advertising revenues in India will probably grow at 15-20% YoY (year-on-year) in calendar 2008 or fiscal 2009 and this is obviously a slowdown related to the 20-25% growth we have logged for calendar 2007. The print medium has gained shares from television over the last couple of years, which is a little bit of a counter intuitive view that came out. Also the sectors on which there is across-the-board bullishness and those that are taking share away are radio, outdoor and Internet. These are sectors that are growing very fast; albeit from a slower or smaller base and that was pretty much the consensus in the conference. So the platforms that are going to show robust revenue growth is Internet, radio and out-of-home – both because of demand and supply side factors.

Q: One of the stocks that you are positive on is actually doing pretty well in trade today – what exactly do you like about the model of Dish TV and are you sensing a cleaner trend by way of performance trajectory from hereon?

A: We are very bullish on the DTH (direct to home) television broadcasting space. We believe that this is a sector that will continue to grow at very strong Compound Annual Growth Rate (CAGR) rates of 60-70% YoY potentially for the next two-three years; not longer. This is a sector that could potentially mimic the trends you have seen in terms of penetration growth and subscriber growth outlook that has happened in the telecom space over the last five years.

The economics are obviously very different and companies will continue to lose money at the EBITDA or EBIT levels for the next three years potentially before turning around. But this is a space, which is significantly underappreciated in terms of growth potential that this sector offers. DTH as opposed to digital cable will probably be the dominant standard of digital television viewing in India over five year period.

Dish TV remains the clear leader in the space as of now and we are obviously not trying to count out competition from Reliance, Bharti and possibly Videocon; at some point that is likely to come in the next one year.

The new competition is probably going to add vitality, activity and mind share of subscribers rather than really be a cannibalizing factor to the likes of Dish TV or Tata Sky. There will be enough space for three-four players on a nationwide basis for the kind of growth that we foresee in the sector. We like Dish TV because it will continue to benefit from the strong subscriber growth that is likely to happen and Reliance’s DTH launch has already happened. So to that extent, one of the big overhangs is already behind it. We obviously expect Bharti Airtel offering, Airtel Digital TV to happen in the September-October 2008 timeframe. So that is something to watch out for. But the space looks so good in terms of growth outlook from two-three year perspective that if one is really not bungling upon execution and cost management, most players will make money in the space over two-three year timeframe.

Q: Media has been quite an underperformer in the past few months – how do you see that space?

A: The Hindi General Entertainment Channels (GEC) is not a great space given the fragmentation of viewership that is actually happening and suddenly you are going from a five-player market to a ten-player market. So the market will take a little bit of time to readjust itself and come back into the growth groove. The cost inflation or cost increases that were possible in broadcasting especially in Hindi GEC will not likely come through in the next twelve months. The spaces that we like in broadcasting are news channels, regional language channels and to some extent, kids channels. So properties or companies that are well positioned in those spaces may outperform relative to the mainstream Hindi general entertainment channels, to that extent.