(Investec) India C&S TV Broadcasting - SR2PIN - 112750

20 May 2015
$AggregName2$
Sector Research
India C&S TV broadcasting

Sector review
Company
Rec
Target
Sun TV Network
Buy
INR460
Zee Entertainment
Hold
INR330
India C &S TV br oadc asti ng :
So whats there to watch on TV tonight?

Within the Indian Cable & Satellite TV market, broadcasters sit at the top of
the value chain above both content producers and distributors, resulting in
durable competitive advantages and a robust return profile. With a cyclical
recovery in ad revenue, founded on an improving economy, and Pay-TV
revenues, led by mandatory urban digitization by FY17E, the outlook is
positive for Indian C&S broadcasters. Competition is limited for now while
potential for disruption is also limited to a few regional markets. We initiate
coverage on Sun TV Network, the largest regional broadcaster, at BUY; and
Zee Entertainment, the second largest national broadcaster, at HOLD. Zee
has a stronger franchise, but this is factored into its FY18E P/E of c.27x.
Broadcasters benefit from structural strengths. The Indian C&S TV market

enjoys superior growth potential compared with global peers, and despite
already high c.80% Pay-TV penetration. Large broadcasters dominate the C&S
TV landscape with the top 5 in India capturing a c.69% share of viewership.
Unlike global markets, content IPR ownership (largely) rests with broadcasters in
India, with content producers a fragmented lot. The relatively unorganized,
fragmented C&S TV distribution market in India implies that negotiating power in
Pay-TV deals rests with broadcasters.
Near-term cyclical recovery in ad market. A stable Central government in

India is stimulating economic growth, strongly correlated with media/ad spend.
Moreover, declining crude oil prices (down 40% from peak) should drive gross
margins up at Indian FMCG companies, which are the largest contributor (c.50%
share) to C&S TV ad spend. The structural growth of e-commerce also needs
media support to drive penetration, in turn fuelling market momentum. We
expect a strong c.18% CAGR in Indian media ad spend for FY16E-18E.
Digital transition to drive subscription revenues. The C&S TV distribution

market in India is dominated by Analog Cable. The lack of addressability in
Analog Cable and unorganized last-mile resulted in under-declaration of subs
and weak monetization for both broadcasters and the government (taxes). The
government has since pushed mandatory digitization of Cable in India PhaseI/II was completed with c.31mn Digital Pay-TV subs while Phase-III has the
potential for c.32mn subs by FY17E. Broadcaster subs revenues will reflect a
c.15% CAGR in Digital Pay-TV subs over FY16E-18E.
Robust return, cash-flow generating franchises. Large C&S TV broadcasters

in India derive >30% CROCI returns, adjusted for new investment initiatives.
Although Sun is limited by its regional presence, the company benefits from a
large film library and an attractive FY17E P/E of c.14x. While Zee has a stronger
content franchise and diverse national presence, we believe this is reflected in
its FY17E and FY18E P/Es of c.34x and c.27x.
Readers in all geographies please refer to important disclosures and disclaimers starting on page 44 In the United
Kingdom this document is a MARKETING COMMUNICATION. It has not been prepared in accordance with the rules in the
FCA Conduct of Business Sourcebook designed to promote the independence of research and is also not subject to any
prohibition on dealing ahead of the dissemination of research. The global contacts include: Andrew Fitchie (EU) and Leon
van Heerden (SA). Full analyst and global contact details are shown on the back page.
Amit Kumar
+91 (22) 6136 7400
amit.kumar@investec.co.in
Contents
Contents ................................................................................................................................. 2
Structure of Indian C&S TV market ......................................................................................... 3
Advertising: Near-term cyclical recovery ................................................................................ 9
Subscription: Riding on the digital transition ........................................................................ 17
Content, competition and margins ....................................................................................... 24
Valuation: We prefer DCF methodology ............................................................................... 33
Sun TV Network (SUTV.NS) .................................................................................................. 36
Zee Entertainment (ZEE.NS)................................................................................................. 40
Page 2 | 20 May 2015
Structure of Indian C&S TV market

The value chain of the Indian C&S TV market (outlined in Figure 1) does not differ
all that much from the global C&S TV market. Fiction and non-fiction content is
generated by a large number of producers, and film content is produced in
collaboration with film studios active in the market. Broadcasters, at the centre of
the value chain, aggregate the content together into a cohesive whole
(channel/platform). Distributors (Cable, DTH) combine many of these channels into
packages and beam them to consumer homes. The primary revenue streams for
the value chain are subscription (consumer pays directly for choice of channels) and
advertising (goods and services companies pay to reach consumers through
advertisements), which are distributed across the stakeholders distributors
(primarily subscription), broadcasters (advertising and subscription) and content
(linked to advertising). However, as with any hyper-local industry, the Indian C&S
TV market has its own intricacies, as discussed below.
Figure 1: Structure of Indian C&S TV value chain
Non-fiction content
Advertisers
Fiction content
C&S broadcasters
DTH operators
(37m n subs)
Cable hom es
(129m n subs)
Cable MSOs
(92m n subs)
Film studios
Cable LMOs
(87m n subs)
Source: Investec Securities research
Figures 2-3 compare the state of the Indian TV market with the global TV
market surprisingly, the development of the Indian Pay-TV (or C&S TV)
ecosystem is much ahead of the world, despite the emerging Indian economy.
Terrestrial TV, free for the consumer and subsuming public and private free-toair (FTA) broadcasters, has a large c.34% share globally. However, its share of
the Indian TV market is a relatively modest c.20%, primarily led by (1) the weak
Indian pubcaster, Prasar Bharati, and (2) inability of private FTA broadcasters
to utilize the large reach of terrestrial infrastructure of Prasar Bharti (not allowed
by law). This provided an automatic fillip to the C&S TV market in India, led by
private broadcasters as well as Cable LMOs (last-mile operators), which had a
much better sense of the infotainment needs of the Indian consumer and
spread Cable TV right across the country.
Figure 2: Global TV subs by technology, CY14 (mn)
Figure 3: Indian TV subs by technology, FY14 (mn)
IPTV, 112
DTH, 37
DTH, 357
Terrestrial,
525
Cable, 559
Source: FICCI-KPMG 2015 report, Investec Securities research
Page 3 | 20 May 2015
Terrestrial,
32
Cable, 92
Source: Investec Securities estimates
Notwithstanding already high c.80% penetration of C&S TV in India, growth

remains superior to its global counterpart (Figures 4-5). According to KPMG,
global Pay-TV operators will likely deliver c.3% CAGR subs growth over
CY14-20. India is expected to lead the global markets with a robust c.5%
CAGR in Pay-TV subs in this period. The robust growth in TV homes in India
(c.3% CAGR) led by improved prosperity in rural markets, is translating into
strong growth for Pay-TV given the limited variety and lack of compelling
content with the Indian pubcaster. The linguistic diversity of the Indian
population (13 languages in India with >10mn native speakers) has been better
served by the invisible hand of the market. In addition to a weak Indian
pubcaster, low penetration of TV homes in India (c.60% of all homes) and low
ARPUs (US$3-4/month on average) are also supportive of Pay-TV growth.
Thus, Indian C&S broadcasters enjoy a superior long-term growth profile.
Figure 4: Global C&S TV subs by technology, CY14-20E (mn)

1,500
200
191
1,000
Figure 5: Indian C&S TV subs by technology, FY14-20E (mn)
150
67
112
475
357
100
37
500
50
559
597
CY2014
CY2020E
101
92
Cable
DTH
IPTV
FY2014
Cable
FY2020E
DTH
IPTV
In Digital TV, the Indian C&S TV ecosystem lags the global market. The share
of Analog Cable in India still remains high at c.54%, which compares
unfavourably with a c.18% share globally. There are historic as well as
economic reasons why: (1) C&S TV started in India in the early 1990s, when
Analog Cable was the dominant technology globally. (2) Analog Cable has both
its disadvantages (poor signal quality, limited capacity) and advantages (low
cost of operation, given low US$3-4/month consumer ARPU in India). Analog
Cable fits well with unorganized, small LMOs in India (given their limited
investment ability). Broadcasters benefitted from barriers to entry in Analog
Cable (limited channel capacity), but the lack of addressability (subs underdeclaration) hurt monetization. Overall, Analog Cable had run its course from a
consumer (limited channel choice), industry and government (tax) perspective,
which pushed the latter towards announcing mandatory digitization of Cable in
India (c.22mn Digital Cable subs currently).
Figure 6: Indian C&S TV subs by technology, FY14 (mn)
DTH, 37
Analog
Cable, 70
Digital
Cable, 22
Page 4 | 20 May 2015
Indian C&S broadcasting is a very hyper-local market catering to the linguistic

diversity of the Indian population (Figure 7). Indian language channels (Hindi,
regional) dominate with >80% of viewership and >70% of the advertising share.
India has a robust history (c.60 years) of local entertainment led by Bollywood
(Hindi film industry), and C&S broadcasting has followed in its footsteps (since
its inception in the early 1990s). The largest C&S broadcasters in India have a
focused presence in Indian languages. Given the emerging state of the Indian
economy and relatively small size of the Indian broadcasting market (compared
with globally), niche broadcasting is limited. Niche channels catering to an
affluent English-speaking audience derive limited viewership, but premium
rates. It is the large/mass broadcasters which have had more success with
niche channels given their distribution advantage.
Figure 7: Genre-wise Indian C&S TV market, CY14 (%)

Share (%)
View ership Advertising
Pow er
Ratio (X)
Language
Genre
Hindi/National
Entertainm ent
Movies
New s
Music
31.2
13.6
3.7
3.2
27.5
6.7
8.4
3.0
0.9
0.5
2.3
0.9
Regional
Entertainm ent
Movies
New s
Music
17.9
3.7
3.7
1.8
15.9
2.8
8.3
1.4
0.9
0.8
2.2
0.8
Sports
Kids
English
Sports
Kids
Entertainment
New s
2.4
7.3
0.9
0.3
4.3
3.8
4.6
3.0
1.8
0.5
5.1
10.0
Infotainment
Others/Niche
Infotainment
Others/Niche
1.3
9.2
2.0
8.4
1.5
0.9
Source: FICCI-KPMG 2015 Report, Investec Securities research
As per the 2001 Census of India, Hindi is the countrys de facto national
language with c.422mn native speakers. That still leaves a >600mn population
with a native language other than Hindi. Given the preference of Indian
consumers to be entertained in their native language, the regional C&S
broadcasting opportunity is as large as the Hindi/National market. There are six
large regional broadcasting markets/segments in India. The South regional
broadcasting segment has limited overlap with Hindi, with the Hindi audience
limited to a few large urban centres in the relevant regions. Marathi and Bengali
are dual-language markets, with the population fluent in Hindi and local
language; however, the regional broadcasting markets are yet larger in size in
the respective regions (Maharashtra, West Bengal).
Figure 8: Language-wise Regional C&S TV market, CY14 (%)
Language
Tamil
Telugu
Marathi
Kannada
Bengali
Malayalam
Others
Share (%)
View ership Advertising
27.6
24.0
14.1
12.1
11.7
5.3
5.3
28.3
17.9
16.0
11.6
11.1
9.1
6.0
Page 5 | 20 May 2015
Global TV broadcasting markets have a wide spectrum of private broadcasters,

from free-to-air (FTA) to ad-free/niche Pay-TV. The FTA networks have a
strong value proposition, catering to a large volume of middle class population
with popular content, whereas Pay-TV focuses on the affluent population with
niche/premium content. Although the Indian TV market is the third largest
globally by volume, a small middle-class population constrains the economics
of FTA channels. As discussed, FTA channels are not allowed to use the
infrastructure of the Indian pubcaster; they need to pay hefty carriage to get onboard C&S distribution platforms. The emerging state of the Indian economy
implies that neither the advertising nor subscription market is well developed.
Pay-TV broadcasters dominate in India (Figure 9), but surprisingly derive most
of their revenues from copious levels of advertising on their channels. They
benefit from a positive feedback loop; positive economics imply an ability to
invest in popular/compelling content, further driving viewership.
Figure 9: Top broadcasters in India, FY14 (%)
Others, 31
Figure 10: Pay-TV broadcasters economics in India, FY14 (Rs mn)

Financials
Total revenues
--Advertising
--Subscription
--Others
Total expenses
--Content
--Overheads
EBITDA *
Adj. EBITDA (excl. advertising)
Adj. EBITDA (excl. subscription)
Star India,
21
Zee
Network, 16
Sun TV
Network, 9
TV18
network, 10
Sony India,
13
Source: Industry data, Investec Securities research
Zee
44,217
23,801
18,022
2,394
(32,174)
(20,688)
(11,486)
12,043
(11,758)
(5,979)
Sun *
22,236
11,944
7,695
2,598
(11,922)
(6,941)
(4,981)
10,314
(1,630)
2,620
Source: Investec Securities research / Company accounts * EBIT as Sun reports

its film costs as amortization
The relationship between content producers and broadcasters is governed by

the ownership of intellectual property rights (IPR). Unlike global markets, Indian
broadcasters have IPR ownership of fiction content (maximum viewership share
on Indian TV). Broadcasters play the primary role in research, concept, script
and casting for fiction content. The execution is typically outsourced to a
production house for fixed/variable remuneration. The exception is film content
film producers and studios pre-date C&S TV in India and are more mindful of
IPR ownership. Also, films have diversified revenue streams and are not wholly
dependent on C&S platforms. Notwithstanding the creative accounting
practices to go with a creative industry, film studios in India have scaled up
better in both revenue and profitability terms (Figure 11). Non-fiction content is
spread across local formats (IPR owned by broadcasters) to international
formats (licensed for local market). We do not discuss sports content given the
limited exposure to this segment of the large listed C&S broadcasters under our
coverage.
Figure 11: Film versus TV content studio financials, FY14 (Rs mn)
Financials
Total revenues
Total expenses
--Direct costs
--Overheads
EBITDA
EBITDA margin (%)
Film content
Eros
11,396
(8,350)
(7,733)
(617)
3,046
27
TV content
Balaji
1,494
(1,268)
(1,006)
(262)
226
15
Source: Investec Securities research / Company accounts
Page 6 | 20 May 2015
Bottom line: Attractive position of Pay-TV broadcasting in India

The large Pay-TV broadcasters are the most attractive link in the Indian C&S TV
value chain. We summarize their strengths and relationship vis--vis other
stakeholders in the value chain below.
The C&S TV broadcasting market in India is fairly consolidated, with the top 5
broadcasters capturing c.69% share of the viewership. Pay-TV broadcasters
robust financial position drives a positive feedback loop (ability to invest in
popular/compelling content, which further drives viewership).
The emerging state of the Indian economy and consequent limited

development of advertising and subscription revenue streams implies that pure
FTA and niche/premium Pay-TV channels have weak economics. The
potential for disruption of the existing business model is limited in the Indian
market. The Indian pubcaster remains mired in internal issues and market
complexity.
The broadcasters hold negotiating power over fiction content producers, given
IPR ownership. Film studios are in a relatively better negotiating position, but
broadcasters also have large legacy film libraries.
The unorganized, fragmented Cable ecosystem in India implies that Pay-TV

broadcasters are better placed in this regard as well. This segment of the value
chain has started to consolidate with the entry of organized DTH platforms and
mandatory digitization of Cable initiated by the Government of India, but the
somewhat unique two-level structure (Cable MSOs, LMOs) implies any
significant level of concentration is some time away.
Based on the above analysis, we argue that C&S broadcasters are at the centre of
the Indian C&S value chain with significant market power, and we see limited
medium-term risks to their position. Localized competition is possible (likely even)
but the challenge of achieving a c.10% market share in the diverse Indian market
(each of top 5 broadcasters have 20-40 channels) implies high barriers to entry
overall. The only real challenge we foresee to broadcasters dominant position is the
potential consolidation among distributors led by digitization. Distributors can push
back against Pay-TV broadcasters subs revenue demands, but the latter anyway
benefits from improved subs declaration in Digital Cable.
Zee Entertainment: Second-largest broadcaster in India

Zee Entertainment, part of the Essel group promoted by Subhash Chandra, is the
second largest broadcaster in India with a presence across Hindi/national, regional
and English/niche segments. Zee has >40 channels covering genres, such as
entertainment, movies, music, sports and niche across languages. Zee channels
hold leading positions in non-South regional markets and robust positions in Hindi
markets, but lags competition in South regional markets. Zees sports franchise was
acquired from Middle East-based Taj TV in 2010. Zee was the pioneer in
distributing Indian content and channels in global markets, targeting the NRI (NonResident Indian) audience. Lately, Zee has expanded its international offerings to
include Indian content dubbed in local languages.
Sun TV Network: Largest regional (South) broadcaster in India

Sun TV Network, part of the Sun Group promoted by Kalanidhi Maran, is the
dominant player in the South regional broadcasting market. Sun has >30 channels
covering genres including entertainment, movies, music, kids, news and comedy
spanning the four South Indian markets (Tamil, Telugu, Kannada and Malayalam).
Sun holds a dominant position in the Tamil market and is on a strong footing in the
Telugu, Kannada and Malayalam markets. Sun expanded its broadcasting
operations to cover FM Radio in 2007, with a pan-India presence and strong
position in South markets. Sun entered the Indian Sports market in 2013, buying the
Hyderabad franchise of popular Indian Premier League (IPL, flagship club format
cricket league in India). Sun has the largest film library of all broadcasters in India.
Page 7 | 20 May 2015
Figure 12: Channel list of Zee and Sun, our coverage broadcasters
Language
Genre
Zee Entertainm ent

Hindi/National
Entertainment
Movies
Music
Regional
Entertainment
Sports
Others
Movies
Sports
Others
HD/Niche
HD/Niche
Sun TV Netw ork - regional

Entertainment
Movies
Comedy
Music
Kids
Others
New s
HD/Niche
Channels
Zee TV, &TV, Z Anmol, Zindagi, Z Smile

Zee Cinema, &pictures, Z Classic, Z Action
Zing, Z ETC Bollyw ood
Z Marathi, Z Bangla, Z Telugu, Z Kannada, Z
Tamizh, Z Salaam
Z Talkies, Z Bangla Cinema
Ten Sports, Ten Action+, Ten Cricket, Ten Golf
Z Studio, Z Caf, Z Khana Khazana, Z Jagran,
ZeeQ
Zee TV HD, &TV HD, Z Cinema HD, &pictures
HD, Ten HD, Z Studio HD
Sun TV, Gemini TV, Udaya TV, Surya TV

KTV, Gemini Movies, Udaya Movies, Kiran TV,
Sun Action, Gemini Action, Suriyan TV
Adithya TV, Gemini Comedy, Udaya Comedy
Sun Music, Gemini Music, Udaya Music, Surya
Music
Chutti TV, Kushi TV, Chintu TV, Kochu TV
Sun Life, Gemini Life
Sun New s, Gemini New s, Udaya New s
Sun HD, Gemini HD, KTV HD, Sun Music HD
Page 8 | 20 May 2015
Advertising: Near-term cyclical recovery

Advertising spend in India has been sub-par over the past few years (c.9% CAGR
over FY12-14), as policy paralysis and consequent economic headwinds weighed
on consumer and advertiser sentiment. However, a stable new Central government
with a renewed focus on economic growth has brightened the medium-term outlook
for the Indian ad market. Economic tailwinds, supported by other structural drivers,
will likely lead to a strong c.18% CAGR in Indian media industry ad spend over
FY16E-18E. We highlight the sharp jump in contribution from the E-commerce
category as one structural driver of Indian C&S TV ad revenues (Figure 14). The
robust growth plans of E-comm companies in India (50%+ revenue CAGR) will
need the continued support of media, specifically C&S TV, to drive penetration, in
return supporting ad growth momentum of the Indian C&S TV industry.
Figure 13: India Media industry ad growth, FY12-18E (%)
20
18
Figure 14: Category-wise spends on Indian C&S TV, CY13-14 (%)

20
16
15
13
11
10
10
7
5
FY2012 FY2013 FY2014 FY2015 FY2016EFY2017EFY2018E
Source: GroupM India 2015 report, Investec Securities estimates
Advertiser
Share (%)
CY2013
CY2014
FMCG/Consum er
Auto
Telecom/ISP/DTH
E-com m erce
Durables
BFSI
Fashion
Real Estate
Political ads
Others
57.0
7.5
8.7
1.3
5.0
4.0
3.5
4.0
0.1
8.9
53.6
7.2
8.2
5.4
4.1
3.8
3.2
3.1
2.3
9.1
Source: Pitch-Madison 2015 report, Investec Securities estimates
The strongest support for (discretionary) consumption and Indian media ad

revenues near term is likely to be the sharp decline in global crude oil prices.
Moderating inflation, the first effect of declining petrol/diesel prices, has increased
the disposable income of Indian consumers. Moreover, declining crude oil prices
directly impact the financials of the FMCG companies, which are the largest
contributor (c.50%) to Indian C&S TV advertising. Figure 15 presents our analysis of
potential uplift in adpro spend of FMCG companies in FY16E. We assume (i) 5%
growth in revenues (led by volumes, we assume flat pricing), (ii) a 30% decline in
crude-linked RM costs resulting in (iii) 200bps expansion in adpro spend in FY16E.
Our analysis suggests a potential c.24% jump in adpro spend by FMCG companies
in FY16E. Given C&S TVs dependence on FMCG ad spend, this is likely to be the
critical growth driver going ahead.
Figure 15: Brent crude price in Indian Rupees, Apr-10-15 (Rs/bbl)
Figure 16: Impact of crude price decline on FMCG financials
8,000
40%
decline
6,000
4,000
2,000
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Source: Bloomberg, Investec Securities research
Page 9 | 20 May 2015
FMCG financials
FY15
FY16E
Revenue
Opex
--RM costs
----Crude oil linked
----Non-crude
--Adpro spends
--Other overheads
EBITDA
Op margin (%)
100
(84)
(50)
(15)
(35)
(11)
(23)
16
16.0
105
(87)
(49)
(11)
(39)
(14)
(24)
18
Yoy (%)
5
4
(2)
(29)
10
24
5
12
17.1
Long-term growth potential of Indian C&S TV ad market

Notwithstanding the strong cyclical recovery in advertising, the long-term potential
of the Indian media ad market is also attractive. We highlight that Indias adex-toGDP ratio of c.0.4% remains well below c.0.8% globally (c.1.0% in developed
markets, c.0.5% in China). The sub-par adex-to-GDP ratio directly correlates to the
limited share of discretionary spending in the consumer basket (around 30-40%
versus 60-70% across global markets). As the Indian economy and disposable
incomes of consumers expand, the resulting higher discretionary spending will
sought to be influenced through advertising by marketers. Our conservative
assumptions on long-term GDP growth (6% CAGR), CPI inflation (6% CAGR) and
adex-to-GDP ratio (improving to c.0.5% over FY15-25E) yield a robust c.14.5%
CAGR in Indian media industry ad revenue/market over the decade.
Figure 17: Composition of India Consumer Price Inflation (CPI), (%)
Staples Group
Figure 18: Long-term Indian media ad growth forecast, FY15-25E (%)
(%)
Food and beverages *

Fuel and lighting
Clothing and footw ear
Housing
Total staples group
44.7
9.5
4.7
9.8
68.7
Discretionary group
(%)
Prepared meals and intoxicants

Transport and communication
Personal care and effects
Household appliances
Others
Total discretionary group
5.0
7.6
2.9
4.3
10.0
31.3
(%)
Real GDP CAGR (%)
CPI inflation CAGR (%)
Nominal GDP CAGR (%)
FY2015 adex-to-GDP (X)
FY2025E adex-to-GDP (X)
India adex CAGR (%)
Source: Central Statistics Office, Investec Securities research * excluding prepared

meals and intoxicants
Com m ent
6.0
6.0
12.0
0.4
0.5 India to catch up to China
14.5
Source: FICCI-KPMG 2014 report, Investec Securities estimates
The Indian media ad market is currently dominated by C&S TV and print (c.43%
and c.38% share respectively). However, the dominant trend recently has been the
rise and exceptional growth of digital media, mirroring global trends, capturing a
robust c.9% share of the market from c.1% a decade ago. We expect the trend to
accelerate going ahead, led by rising smartphone penetration in India, with digital
media capturing c.24% of the market by FY25E, again mirroring global trends
(current c.25% share of digital in global media ad market). The impact would largely
be on print media, given flattening penetration. We expect C&S TV ad share to
remain relatively insulated due to (1) its status as a flagship media platform in India
(maximum reach); (2) rising reach among rural markets relevant to large advertisers
(for ex. FMCG); and (3) digitization (greater channel variety and thus, viewership).
We model C&S TV ad CAGR of c.14% in the long run (over FY15-25E).
Figure 19: Platform-wise Indian media ad growth, CY14-24E (%)
6
4
9
100
75
6
6
24
Figure 20: Reach of various media platforms in India (%)

80
60
38
23
50
25
43
14% CAGR
41
40
20
CY2014
CY2024E
C&S TV
Print
Digital
FM Radio
Outdoor
Source: GroupM India 2015 report, Investec Securities estimates
Page 10 | 20 May 2015
C&S TV
Print
FM Radio
Internet
Mobile
Internet
Market share key determinant of network ad growth

Aside from Indian Media/TV market ad growth, the network market share (weighted
average viewership of channels) is the major determinant of ad growth for a specific
broadcaster/network. Figures 21-22 show the strong correlation between the Zee
and Sun networks market share and ad growth historically; we highlight that our
market share estimates are based on the respective market presence of the
networks Zee is present in a large number of Indian C&S TV segments (national,
regional, niche) while Sun is present in a limited number of segments (regional), but
dominates in its respective markets. Zees robust market share gains over
FY12-15E meant its ad growth was ahead of the market; Suns market share losses
resulted in relatively subdued ad growth over FY12-15E. However, predicting future
network market share is challenging given multiple channels in the network (Zee
>40, Sun >30) as well as changing consumer preferences.
Figure 21: Zee network market share and ad growth, FY10-15E (%)
30
Figure 22: Sun network share and ad growth, FY10-15E (%)

40
22
19
20
20
18
30
31
30
10
18
17
16
17
18
30
22
20
19
FY2010
FY2011
FY2012
26
10
5
0
(1)
FY2013
FY2014
FY2015E
FY2010
(10)
24
(2)
28
FY2011
FY2012
FY2013
FY2014
FY2015E
(10)
Zee market share (%)
Zee (ex. Sports) ad growth (%)
Sun market share (%)
Source: Investec Securities estimates / Company accounts
Sun ad growth (%)
TRAIs 12-min/hour ad cap not a major concern anymore

Indias media regulator TRAI decided to regulate ad time on Indian C&S TV
channels effective from 2QFY14, capping it at 12 mins/hour on a clock-hour basis.
Technically, the ad cap is yet to be implemented given that few small broadcasters
(news, music) have opposed the regulation. However, the three largest C&S TV
networks in India (Star, Zee, Viacom18) are in compliance. The Sony and Sun
networks are also selectively in compliance with marginal 1-2min/hour variance in
network ad volumes. Sun significantly reduced ad volumes in FY14 from
c.16mins/hour in FY13 and thus the impact is largely captured in its financials. As
already highlighted, with a majority (>65%) of the Indian C&S TV viewership
captured by the five large broadcasters, the 12-min/hour ad cap is practically in
force. Additionally, the ad rate/CPM gap between TV and other media platforms in
India implies that industry-wide ad volume reduction will drive higher pricing.
Figure 23: CPM of TV and print advertising in India
Print advertising
Ad rate card (Rs/sqcm)
Discount on rate card (%)
Effective ad rate (Rs/sqcm)
Ad size (sq cm)
Print ad spend (Rs mn)
Consumer reach (mn)
Print CPM (Rs m n/m n)
TV advertising
Ad rate (Rs mn/slot)
# of ad slots
TV ad spend (Rs mn)
Consumer reach (mn)
TV CPM (Rs m n/m n)
TV/Print CPM (%)
13,280
50
6,640
416
2.8
9.6
0.29
0.25
6
1.5
7.5
0.20
(30)
Com m ent
Dainik Jagran UP front page
For large advertisers
Quarter-page
On front page
Cost of reaching 1m n consum ers
Com m ent
Star Plus primetime; slot=10sec
2 ads of 30secs each
In primetime
Cost of reaching 1m n consum ers
TV at discount to Print
Source: Industry data, Investec Securities estimates
Page 11 | 20 May 2015
New viewership measurement research in India (BARC)

TAM, the current C&S TV viewership measurement research in India, has been
under a cloud. Broadcasters have highlighted its inadequacies, largely due to
limited sampling (of c.10K C&S TV homes as a proxy for c.129mn actual C&S TV
homes in India). The umbrella body of broadcasters in India, Indian Broadcasting
Federation (IBF) undertook the initiative of new viewership measurement research,
BARC. BARC can potentially address the inadequacies of TAM with an expanded
sample (c.20K C&S TV homes to start with, c.50K homes in 4 years). Figure 24
presents our analysis of the TAM viewership sample compared to the actual Indian
C&S TV homes across markets, which BARC should mirror. However, the details
will remain sketchy till the time BARC is officially launched.
Figure 24: C&S TV homes across markets, TAM versus actual (%)
Market
TAM
Actual
National/Hindi
Uttar Pradesh+
Punjab-Haryana
Gujarat
Madhya Pradesh+
Rajasthan
Delhi-NCR
10
8
7
7
6
8
10
8
5
5
4
2
Regional
Tam il Nadu+
Andhra Pradesh
Maharashtra+ (Hindi as w ell)
Karnataka
West Bengal (Hindi as w ell)
Others
7
8
18
7
7
8
16
11
11
7
6
14
Source: TAM, BARC, Investec Securities research
Zee: Robust headline growth led by aggressive strategy

Zee was a relatively sedate participant in the Indian broadcasting market throughout
the last decade (2000s). Having established its Hindi (Zee TV + Zee Cinema)
franchise in the late 1990s, Zee focused on expanding its niche channel franchise in
the 2000s, an effort that remains limited in terms of scalability (and not just for Zee).
Essel Groups (Zees parent) efforts in regional markets (Marathi, Bangla, Telugu
and Kannada) were led by a sister concern; Zee consolidated these channels at
end-FY10, and simultaneously drove a dramatic change in its thinking. Post
continued market share losses throughout FY07-12, lead fragmentation or get
fragmented became the driving philosophy behind Zees increasingly aggressive
go-to-market strategy. This implied higher content investment in existing channels
and more new channel launches to expand the network viewership.
Figure 25: Zee list of new initiatives, FY12-15
Initiative
Ditto TV
Zee Bangla Cinem a
Zee Alw an
ZeeQ
&pictures
Zee Anm ol
Zee Bioskop
Zee Music Com pany
Zindagi
Zee Nung
&TV
Launch
4QFY12
2QFY13
2QFY13
3QFY13
2QFY14
2QFY14
3QFY14
4QFY14
1QFY15
1QFY15
4QFY15
Com m ents
Internet/OTT TV
Bangla m ovie channel
Arabic GE channel
Niche kids channel
Hindi m ovie channel
Hindi repeat channel
Bahasa movie channel
Hindi m usic label
Niche Hindi GE channel
Thai movie channel
Hindi GE channel
Page 12 | 20 May 2015
The fruits of the strategy were visible in network market share gains as well as
strong, above industry average ad growth in FY13-15. We model a continued strong
c.18% CAGR in Zees LTL (like-to-like) ad revenues over FY16E-18E led by (1) a
c.18% CAGR in Indian C&S TV ad revenues and (2) relative stability in Zee
networks LTL market share during this period. &TV, the Hindi general
entertainment channel launch in late 4QFY15, is by far the most ambitious by Zee in
a long time. Including the contribution from &TV (6%/7.5%/9% market share in Hindi
Entertainment genre in FY16E/17E/18E), we estimate Zees network market share
to reach 20%+ by FY18E and correspondingly model a strong c.24% CAGR in
Zees overall ad revenues during FY16E-18E. In our view, LTL gains in market
share and ad revenue growth are as important as company-level performance given
(1) they are margin accretive and (2) new channel launches always contribute to
headline growth, but not necessarily value (high hit-flop ratio).
Figure 26: Zee network and LTL (excl. &TV) share, FY13-18E (%)
Figure 27: Zee network and LTL (ex. &TV) ad grwth, FY13-18E (%)
30
28
30
22
20
20
20
22
20
17
10
17 17
18 18
FY2013
FY2014
19 19
20 19
20 19
20 18
22
21
18
17
18
18
10
FY2015E FY2016E FY2017E FY2018E
Zee network market share (%)
FY2013
Zee LTL market share (%)
FY2014
FY2015E FY2016E FY2017E FY2018E
Zee (ex. Sports) ad growth (%)
Source: TAM, Investec Securities estimates
Zee LTL ad growth (%)
The majority of Zees recent channel launches were extensions of the existing
bouquet with the content library already in place (low content cost). We believe
multiple factors were behind Zees approach to &TV launch: (1) the competing Star
and Sony networks already had two Hindi entertainment channels each and (2) Zee
TV was positioned as a family channel (limited content variety); &TV is expected to
expand Zees audience radically. &TV is a contemporary Hindi entertainment
channel, featuring >20 hours of original content at launch. &TV had an average
launch, reporting c.4.5% market share in the first month of operation (Mar-15), given
Zees content and marketing investment. We are not yet factoring in any significant
value accretion from &TV in our estimates. However, &TV can become value
accretive if it can double its market share to c.9% in 2-3 years. Zee will have plenty
of opportunity to experiment, given the 3-6 month content cycle in India.
Figure 28: &TV financial estimates in our Zee model, FY16E-19E (Rs mn)
&TV m arket share (%)
Hindi entertainment segment (Rs bn)
Adjustment factor (%) *
&TV ad revenue
&TV subs revenue
&TV revenue
&TV fiction content cost
&TV non-fiction/films cost
&TV marketing cost
&TV distribution cost
&TV other overheads
&TV opex
&TV EBITDA
FY2016E #
6%
7.5%
60
60
75
85
2,714
3,844
2,714
3,844
(2,009)
(2,009)
(2,184)
(2,184)
(750)
(750)
(500)
(500)
(750)
(750)
(6,193)
(6,193)
(3,480)
(2,349)
6%
70
75
3,145
3,145
(2,218)
(2,293)
(750)
(500)
(816)
(6,577)
(3,432)
FY2017E #
7.5%
70
85
4,456
4,456
(2,218)
(2,293)
(750)
(500)
(816)
(6,577)
(2,121)
9%
6%
70
90
5,662
5,662
(2,218)
(2,293)
(750)
(500)
(816)
(6,577)
(915)
82
75
3,706
3,706
(2,915)
(2,408)
(600)
(400)
(925)
(7,248)
(3,541)
FY2018E #
7.5%
82
85
5,251
5,251
(2,915)
(2,408)
(600)
(400)
(925)
(7,248)
(1,997)
9%
82
90
6,672
385
7,057
(2,915)
(2,408)
(600)
(400)
(925)
(7,248)
(191)
FY2019E #
7.5%
9%
87
87
85
90
5,569
7,076
385
1,099
5,954
8,175
(3,207)
(3,207)
(2,528)
(2,528)
(600)
(600)
(320)
(320)
(1,017)
(1,017)
(7,672)
(7,672)
(1,718)
503
Source: Investec Securities estimates * for Tier-II channels in Hindi entertainment segment, # base case highlighted in grey
Page 13 | 20 May 2015
Zees LTL market share trend is where we differ from street

The street expects sustained robust LTL market share gains by Zee Network,
essentially based on its strong performance in the recent past. Given the volatility
and changes in consumer preferences, we believe a one-way upward trend in Zees
LTL market share is highly unlikely. On the contrary, we see renewed content
investment by existing competitors and possible new entrants as potential risks. We
use the global standard Herfindahl-Hirschman Index to study the competitive
intensity across Indian C&S TV segments. Among the relevant segments for Zee,
Marathi and Bangla stand out as oligopolistic/concentrated markets, and where Zee
channels have dominant market positions. The potential for competition in the
Indian C&S TV market remains high given attractive growth opportunities (c.18%
CAGR ad growth over FY16E-18E). Rational competition will look for markets with
excess profits and disruption potential.
Figure 29: Herfindahl-Hirschman Index across Indian C&S TV
segments
Figure 30: Market share of key Marathi channels, FY11-15 (%)

40
FY2010
FY2011
FY2012
FY2013
FY2014
Hindi entertainment
1,681
Hindi movie channels
2,190
Bangla entertainm ent
2,497
Marathi entertainm ent 2,497
Tam il entertainm ent
3,448
Telugu entertainment
2,057
Kannada entertainment
2,034
Malayalam entertainm ent2,700
1,738
1,908
2,505
2,325
3,695
2,246
2,042
2,653
1,686
2,027
2,454
2,243
3,586
2,047
2,121
2,737
1,613
1,798
2,608
2,509
3,169
1,958
2,099
2,479
1,638
1,291
2,710
2,484
3,100
1,860
2,078
2,438
30
20
10
43
36
36
35
22
27 25 27
FY2011
FY2012
18
26
23
26
19
18 17
FY2014
FY2015
Zee Marathi (%)
FY2013
Star Pravah (%)
ETV Marathi (%)
Source: TAM, Investec Securities research
The other overhang on Zees LTL market share is the breakup of MediaPro, Zees
channel distribution JV with Star (#1 C&S TV broadcaster in India). We believe the
impact of MediaPro on the subscription revenues of Star and Zee is well
understood, the impact on network market share is less appreciated. We discuss
the ongoing cable digitization in India later, but note that the grand digital transition
resulted in a large number of public disputes between C&S TV broadcasters and
distributors (Cable, DTH). The strength of MediaPro (combined distribution of #1
and #2 broadcasters channels in India) helped Star and Zee navigate this transition
smoothly. In comparison, Sony Network had the largest number of disruptions, and
considerable loss in market share. A coincidence? We think not. At any rate, the
breakup of MediaPro led by regulatory action has levelled the playing field, and
Zees public disputes with distributors have increased.
Figure 31: Disputes between major MSOs and aggregators
Distributor
Hathw ay-GTPL
Airtel Digital TV
Hathw ay-GTPL
GTPL
SitiCable
DEN Netw ork
Hathw ay
DigiCable
Dish TV
InCable
Hathw ay
Pre-MediaPro (FY2014)
Post-MediaPro (FY2015)
Aggregator
Tim e period Distributor
Aggregator
Tim e period
Indiacast-Viacom18
April-13 Hathw ay
Taj TV/Zee
Septem ber-14
Star Sports
May-13 Fastw ay
Taj TV/Zee
January-15
Sony Discovery
August-13 DigiCable
Taj TV/Zee
January-15
Star Sports
November-13
Star Sports
November-13
Sony Discovery
November-13
Sony Discovery
November-13
MediaPro
Decem ber-13
Indiacast-Viacom18
December-13
Sony Discovery
February-14
Star Sports
March-14
Page 14 | 20 May 2015
Sun: Market share losses drive weak ad growth

The regional C&S TV market in India developed alongside the national/Hindi
broadcasting market; Zee and Sun were the first broadcasters in Hindi and regional
languages, respectively. However, competition in the form of Star and Sony
emerged earlier in the Hindi C&S TV market. Sun had a clear run consolidating its
first mover advantage in the South regional C&S TV markets. However, the
competitive reality started to catch up with Sun TV in the form of national (Zee) and
local competition (Asianet in Malayalam, Maa TV in Telugu; both lately acquired by
Star network). We model an improving but below industry average c.10% CAGR in
Suns overall ad revenues for FY16E-18E driven by (1) a strong c.18% CAGR in
Indian C&S TV ad revenues but for (2) a c.350bps loss in Suns network market
share during this period. Nonetheless, we also highlight that Sun has managed to
maintain its leadership position in the South regional C&S TV market despite
operational (competition) and other concerns that counts for something!
Figure 32: Sun network share and ad growth, FY13-18E (%)
Figure 33: Market share of key Telugu channels, FY11-15 (%)
40
30
40
28
26
24
30
23
22
21
11
13
20
20
10
FY2013
0
FY2014
10
35
33
30
16 15
17 15
FY2011
FY2012
20
25
16
21
16
21 23 21
FY2015E FY2016E FY2017E FY2018E
Sun market share (%)
Sun ad growth (%)
Sun Gemini TV (%)
FY2013
FY2014
Star Maa TV (%)
FY2015
Zee Telugu (%)
FY15 proved a wake-up call for Sun, when its flagship Telugu entertainment
channel Gemini TV lost its #1 position to Maa TV from a dominant position only as
far back as FY11. Emerging competition, such as Maa TV as well as Zee Telugu,
unsettled Sun and wowed audiences with differentiated fiction as well as non-fiction
content. Sun TV responded with a shake-up of Gemini TV channel management as
well as revamped content. As a result, it has already seen a moderation in the loss
of network market share in the past few quarters. Renewed focus on content, a
large legacy film library (built up over the last 20 years) and traditional distribution
strength (wide reach) lead us to believe the worst of Suns network market share
losses may be over (soon). Relative stability in market share may drive upgrades to
our and consensus estimates of ad growth and earnings (although we are not
counting on it for our investment case).
Figure 34: Sun network market share, 3QFY14-4QFY15 (%)
30.0
26.0
25.3
24.9
24.5
24.5
24.0
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
20.0
10.0
3QFY14
Page 15 | 20 May 2015
Few market-specific trends may be supportive for Sun

Sun TV has a more concentrated presence in a few markets whereas Zee is a
national broadcaster with a diversified presence across C&S TV markets in India.
The market-specific risk is higher for Sun. Local market-specific issues in Suns two
key markets, Tamil and Telugu, have impacted consumer and business sentiment.
Local businesses constitute a healthy c.30% share of advertising in South C&S TV
ad revenues. However, the overhangs have been cleared lately and may further
support Suns ad growth. We discuss below.
Tamil Nadu, one of the most industrialized states in India, witnessed severe
power shortages (4-14 hours across the state) over FY13-14. The state
government was forced to raise tariffs to fund new power projects and external
power purchases, which alleviated the situation somewhat in FY15. This may
drive improved business sentiment in the state.
Andhra Pradesh had witnessed a movement for the creation of a separate state
Telangana. The movement gained momentum over FY13-14, with continued
protests and agitations by people both supporting and opposing the division of
Andhra Pradesh and creation of Telangana. The Central government finally
acceded to the creation of Telangana state in FY15, putting the issue to bed.
We expect consumer sentiment to improve as a result.
Figure 35: All-India and South market power deficit, FY12-15 (%)
20.0
15.5
15.0
10.0
5.0
8.8
6.8
8.5
4.3
8.7
4.2
3.7
FY2014
FY2015
FY2012
FY2013
All-India (%)
South region (%)
Source: Central Electricity Authority, Investec Securities research
Page 16 | 20 May 2015
Subscription: Riding on the digital transition

The C&S TV distribution market in India has historically been dominated by Cable.
In an unregulated environment, the Indian Cable distribution segment developed
into an unorganized, fragmented industry structure with multiple stakeholders
(LMOs, distributors, MSOs). The unorganized structure and analog nature of the
Indian Cable market resulted in a skewed ecosystem. LMOs, with a local monopoly
over their locality/areas of operation, controlled the key last-mile functions (access,
billing, functions). The analog state of the Indian Cable market implied a lack of
addressability (transparency and control) for the organized players (MSOs,
broadcasters), with LMOs under-declaring their actual subs base and capturing
disproportionate value in the chain (c.75% of all-India consumer ARPU of
c.Rs175/month). The entry of organized DTH distribution only moderately changed
the ground situation, with LMOs passing on their tax/cost advantage to consumers
in the form of low ARPUs (and maintaining their dominant position).
Figure 36: Expected revenue share in analog and DAS (digital, addressable) cable (Rs/month)
Consumer ARPU
Declaration (%)
Service tax (@ 12.36%)
E-tax (@ 8%)
Governm ent revenue (net)
LCO revenue (gross)
LCO share (net, % of ARPU net off Tax)
LMO revenue (net)
MSO revenue (subscription from LMO)
MSO revenue (carriage from broadcaster)
MSO share (net, % of subs + carriage)
MSO revenue (net)
Broadcaster revenue (subscription from MSO)
Broadcaster payment (carriage to MSO)
Broadcaster revenue (net)
Analog
Share (%)
175
100
15
3
2
5
3
170
78
132
76
37
45
25
21
12
62
(45)
17
10
DAS
Share (%)
250
100
100
31
20
51
20
199
45
90
36
110
36
45
65
26
80
(36)
44
18
With LMOs declaring only 15-20% of their actual subscriber base in Analog Cable,
the organized C&S TV market (MSOs, broadcasters) suffered from below-par
monetization (c.20% share of all-India consumer ARPU); this compares with a 3035% share of consumer ARPU for broadcasters alone in developed markets. The
Government of India was also losing the majority of its tax revenues due to underdeclaration of subscribers. Concerned by the tax evasion, the government enforced
mandatory DAS (Digital, Addressable System) on the Cable ecosystem in India.
DAS would make under-reporting of the subs base near impossible with STBs (settop-boxes) and encrypted signals in subscriber homes, controlled by organized
MSOs. The resulting subs transparency would drive (1) more equitable revenue
sharing across Indian C&S TV stakeholders and (2) higher ARPUs. The
government proposed to drive DAS in 4 phases (metros, Tier-I/II cities, rest of urban
areas and finally, rural areas), as highlighted in Figure 37.
Figure 37: DAS phases (as proposed by the government) and implementation (as estimated)
Subs (m n)
Governm ent deadline

Initial
Revision 1 Revision 2
Estim ated
im plem entation
Phase-I
(4 metro cities)
12
Mar-12
Oct-12
Dec-12 (delay of 2 months)
Phase-II
(38 cities >1mn population)
19
Mar-13
Mar-13
Sep-13 (delay of 6 months)
Phase-III
(all remaining urban areas)
32
Sep-14
Dec-14
Dec-15
Jun-16 (delay of 6 months)
Phase-IV
(all remaining areas - rural)
66
Dec-14
Dec-14
Dec-16
Mar-20 (delay of 3+ years)
Source: MIB, Investec Securities estimates
Page 17 | 20 May 2015
How did Phase-I/II DAS play out for broadcasters? Very well
Phase-I/II of DAS, covering the lucrative metro and Tier I/II urban markets of India,
has already been completed effective Dec-2012 and Sep-2013 respectively. The
modest delays were largely due to logistical challenges, notably in Phase-II DAS.
Phase-I/II DAS saw c.31mn C&S TV subs (as of FY13) converting to digital (either
Digital Cable or DTH, the latter being a voluntary digital platform). As expected,
large pay/C&S TV broadcasters in India were major beneficiaries of the digital
transition (Figure 38). We highlight that Zee upfronted some of the gains led by its
MediaPro JV with Star in FY12. Nonetheless, Zee reported cumulative 77% growth
in domestic subs revenues over FY12-15E, ahead of 68% growth in paying subs
(Digital Cable, DTH, 20% of Analog Cable subs); the growth was primarily led by
volume. Sun lagged initially, due to a number of specific factors we discuss later in
this report, but can be seen catching up in FY14-15E.
Figure 38: Zee and Sun subs revenue growth, FY11-15E (%)
50
49
150
29
30
Figure 39: India pay-TV subs by technology, FY10-15E (mn)
26
26
19
100
16
10
(2)
FY2011
FY2012
FY2013
50
1
FY2014
FY2015E
(10)
Zee subs growth (%)
88
88
13
88
13
22
29
5
33
FY2010
FY2011
FY2012
FY2013
Sun subs growth (%)
DTH
DAS
70
72
22
22
37
41
86
FY2014 FY2015E
Analog Cable
Unlike Cable MSOs, broadcasters did not have to make any significant capital
investments to capitalize on the digitization opportunity. Nonetheless, there were
some implicit discounts on wholesale channel/bouquet rates. This was a form of
subsidy/investment sharing between the Cable MSOs and broadcasters to drive the
digital transition forward. Additionally, broadcasters benefitted from unlocking of
capacity constraints in the transition from analog to digital. Analog Cable has a
theoretical maximum capacity of 106 channels (real-world 70-80 channels),
compared with >600 C&S TV channels active in India currently. The large demandsupply mismatch resulted in sharp growth in carriage and placement fees (C&P)
historically, paid by broadcasters to distribution companies. Digital Cable has
theoretical capacity of >1,000 channels (currently 400-500 channels). The carriage
charges of broadcasters reduced post Phase-I/II DAS, but large broadcasters (Zee,
Sun) pay nominal C&P fee and thus, gains are modest.
Figure 40: All-India carriage fees for channels, FY11-15 (Rs mn)
1,000
750
731
783
607
586
434
363
500
365
277
377
287
FY2014
FY2015
250
FY2011
FY2012
FY2013
Existing channels
New channels
Page 18 | 20 May 2015
However, sub-par distributor returns in Phase-I/II DAS

The Indian C&S TV broadcasters have (cumulatively) achieved the gross
subscription ARPU target of c.Rs80/sub/month in DAS. However, Cable MSOs
gross subscription ARPU target (from LMOs) has lagged in most Phase-I/II DAS
markets (Figure 41; expectation of c.Rs110/sub/month). Lower-than-expected
revenues yet an elevated cost structure imply that Cable MSOs returns have been
hit, despite large DAS investments (back-end; STBs at consumer-end). LMOs,
although unorganized, were the key drivers behind the spread of C&S TV (and
Cable dominance) in India, and continue to fight for their rights. LMOs maintain their
hold over key last-mile functions (billing, collections), and continue to derive a >50%
share of consumer ARPU. Our channel checks indicate that TRAI-mandated 35%
revenue share for LMOs is unviable, given it barely covers their operating costs.
Figure 41: MSO gross subscription ARPU across various Phase-I/II
DAS markets (Rs/sub/month)
MSO operating costs (per-sub)

Gross content cost (Rs/month)
Carriage income (Rs/month)
Net content cost (Rs/m onth)
Fixed overheads (Rs/month)
DAS variable cost (Rs/month)
MSO operating cost (Rs/m onth)
150
110
100
100
95
85
65
50
Delhi
Mumbai
Kolkata
Bangalore
Figure 42: Sensitivity analysis on MSO returns (%)
Other
Phase-II
Sensitivity analysis
Net subscriber ARPU
MSO revenue share (%)
MSO subscriber revenue
MSO operating cost
MSO operating profit (Rs/m onth)
MSO operating profit (Rs/year)
Net STB investment
Fixed+WC investment
Total investm ent (Rs/sub)
Pre-tax CROCI (%)
Com m ents
80
(45) From broadcasters
35
30
10
75
Actual
199
45
90
75
14
173
1,000
669
1,669
10
Expected
Net off tax
50
55
100
110
75
75
24
34
293
412
1,000
1,000
699
729
1,699
1,729
17
24
MSOs continue to push LMOs (through legal and operational means) for a higher
share in consumer ARPUs, but are also starting to push back against broadcasters.
So far, the disputes between C&S TV distributors and broadcasters have been
settled in favour of the latter. Given that the C&S TV broadcasting segment in India
is more concentrated than the distribution segment (Figure 42), the negotiating
power of broadcasters is significantly more than distributors. However, the C&S TV
distribution segment in India is also consolidating, led by DAS (smaller distributors
are finding it difficult to fund the large investments that DAS entails). Also, recent
TRAI regulations governing the conduct of broadcaster JVs (such as MediaPro)
have limited their clout. This has effectively increased the bargaining power of
distributors and provided an avenue to manage payouts to broadcasters.
Figure 43: Market share of top broadcasters, distributors in India (%)
100
80
60
40
78
69
52
20
Top-5 broadcasters *
Top-7 distributors #
Top-7 distributors in
digital #
Source: Investec Securities estimates * viewership share # subs share
Page 19 | 20 May 2015
How are broadcasters likely to fare in Phase-III? Quite well

Phase-III DAS, covering the remaining urban markets of India, has been delayed by
12 months as the government recently shifted the deadline from Dec-14 to Dec-15.
Given the logistical challenges seen in Phase-II DAS, we model a further 6 month
delay in completion of Phase-III, beyond the official deadline. Our channel checks
indicate industry reluctance to implement Phase-IV DAS (rural markets) given the
large investment required and limited ARPU potential. Thus, we model Phase-IV
DAS implementation only by FY20E. Nonetheless, Phase-III DAS provides a further
lucrative revenue opportunity for C&S TV broadcasters with c.32mn C&S TV (payTV) homes, equal to Phase-I and II combined. C&S TV broadcasters would be
automatic beneficiaries of complete declaration of the subs base in the shift from
analog to digital (volume gains). We model a 15% CAGR in paying subs (DTH, DAS
and 15% of Analog Cable) for Indian C&S TV over FY16E-18E.
Figure 44: India pay-TV subs by technology, FY13-18E (mn)
Figure 45: India effective pay-TV subscriber growth, FY13-18E (%)
150
30
50
100
70
72
42
5
33
22
22
37
41
23
66
86
50
48
44
20
23
18
15
28
47
55
61
10
FY2013
FY2014 FY2015E FY2016E FY2017E FY2018E

DTH
DAS
Analog Cable
FY2013
FY2014
FY2015E FY2016E FY2017E FY2018E
Consumer ARPUs will certainly witness like-to-like inflation in DAS but (1) a
significant share will be to satisfy the incremental tax demands of the government
and (2) the rest should accrue to MSOs (improvement in current abysmal returns
from DAS investments). Contrary to consensus estimates, we do not expect any
material ARPU growth for C&S TV broadcasters; in fact, a stable ARPU would be
an achievement given the inclusion of large mass audience (Phase-III DAS) into the
paying subs mix. Figure 46 shows the choice of packages across Cable MSOs and
DTH. The Phase-I/II DAS subs mix was skewed towards mid-level packages, with
robust uptake of premium packages; the Phase-III DAS subs mix is likely to be
skewed towards basic packages but with reasonable uptake of mid-level packages
(demand for infotainment and sports channels). The pressure on C&S broadcaster
ARPUs from the above is likely to be negated by improved uptake of VAS (HD
services; low 3% penetration currently but rising) in Phase-I/II DAS markets.
Figure 46: DTH and Cable MSO packages and pricing (Rs/sub/month)
Type
Premium
Mid-Level
Basic
TataSky DTH
Package
Price
Mega HD pack
Mega pack
Grand Sports
Metro pack
Supreme Sports
625
525
470
380
340
Dhamaal Cricket
Dhamaal Mix
275
240
Hathw ay Cable
Package
Price
Premium HD
Premium Plus
569
419
Premium pack
Popular pack
349
289
Starter pack
230
Page 20 | 20 May 2015
Sun: Catch-up subscription growth led by Phase-III DAS

The South Indian C&S TV market is a large one with c.47mn subs/homes, out of a
total c.129mn pay-TV homes in India (FY14 data). Despite the large size of the
opportunity, and Suns superior per-subs realization led by strong share in the key
markets where it operates, Suns subs revenues are substantially under-indexed.
Zees core Hindi broadcasting segment may be larger in size but is also more
fragmented with Star, Colors and Sony competing for a share of the pie. Zee
certainly benefitted from its MediaPro distribution JV, till early-FY15. However, Sun
also faced two key roadblocks in its efforts to translate its strong position into subs
revenues: (1) Sun Direct, Suns sister DTH concern, faced a major operational glitch
in FY11, moderating its subs growth momentum in FY12-13. (2) More importantly,
the share of South India in Phase-I/II DAS was much below the all-India average,
reflected in the gap between pay-TV penetration of Sun versus Zee.
Figure 47: Sun and Zee network market share, FY11-15E (%)
Figure 48: Sun and Zee Pay-TV penetration, FY14 (%)

Sun
30
20
31
10
30
17
28
26
17
16
24
18
FY2012
FY2013
Sun network (%)
FY2014
Gross subs
Domestic subs revenue (Rs mn)
Per-sub ARPU (Rs/month)
Pay-TV subs base (mn)
Potential subs base (mn)
Pay-TV subs penetration (%)
6,479
26
21
48
43
12,417
20
52
81
64
Net subs
Carriage/service fee (Rs mn)
Net subs revenue (Rs mn)
Per-sub ARPU (Rs/month)
Pay-TV subs base (mn)
Potential subs base (mn)
Pay-TV subs penetration (%)
(336)
6,143
26
20
48
41
(1,670)
10,747
20
45
81
55
19
FY2011
Zee
FY2015E
Zee network (%)
Suns relatively modest c.14% CAGR in subs revenues over FY13-15E reflects the
limited benefits accruing from Phase-I/II DAS, as South Indias share in C&S TV
subs shifting from analog to digital at c.23% was below c.36% at the all-India level
(including Phase-III/IV markets). From the low base in FY15E, we model a strong
c.20% CAGR in Suns subs revenues for FY16E-18E led by (1) leadership position
in three out of four South Indian markets; (2) a larger contribution of South India in
Phase-III DAS; and (3) catch-up revenues from a few markets in Phase-I/II DAS
(Chennai, Hyderabad), which are pending conversion from analog to digital. Suns
9MFY15 subs growth significantly outperformed Zee, led by voluntary digitization
(DTH); DTH platforms have capitalized on consumer demand for digital TV (more
channels) in South India.
Figure 49: Pay/C&S TV homes across DAS markets, FY14 (mn)
All-India
Phase-I - completed
10
Phase-II - completed
18
Phase-I/II - com pleted
28
Phase-I/II - pending (a)
3
Phase-I/II - total
31
Phase-III
32
Phase-IV
66
Total C&S TV hom es
129
South India Rest of India

10
4
14
4
24
3
7
24
14
18
27
39
48
81
Figure 50: Sun domestic subs revenue growth, FY13-18E (%)

30
26
27
21
20
16
12
10
1
-
Notes:
(a) Chennai and Greater Hyderabad.
Page 21 | 20 May 2015
FY2013
FY2014
FY2015E FY2016E FY2017E FY2018E
Arasu Cable potential overhang on Suns subscription gains

Figure 51 presents the breakup of Suns subs revenues across DTH and Cable over
FY10-15E. Suns DTH subs revenues have shown consistent growth throughout,
despite the operational concerns at Sun Direct, as discussed previously. However,
Suns Cable revenues, already a minority share of Suns subs revenues, witnessed
a sharp decline over FY12-13. Sun promoters have well-known links with DMK, a
political party in the state of Tamil Nadu. The loss of DMK in the state assembly
elections in 2011 brought the opposition AIADMK to power. AIADMK launched
Arasu Cable as the government-owned Cable MSO, which services c.7mn out of
total c.15mn subs in the state. Arasu initially switched off Sun TV channels, and
although the dispute was resolved, Sun had to give discounts to Arasu to carry its
channels on the network; Suns cable subs revenue from Tamil Nadu declined to
c.Rs300mn/annum from c.Rs1.2bn/annum previously.
Figure 51: Sun domestic subs revenue breakup, FY10-15E (Rs bn)
8.0
2.3
6.0
2.0
4.0
2.0
2.1
1.6
1.4
3.1
3.4
3.7
FY2011
FY2012
FY2013
1.6
4.5
5.2
1.8
FY2010
DTH subs revenue (Rs bn)
FY2014 FY2015E
Cable subs revenue (Rs bn)
Later, Arasu Cable was refused a DAS licence as TRAI regulations barred a
government-owned entity from operating as a Digital Cable MSO. The shift from
analog to digital in Chennai is stuck, pending the legal dispute between Arasu Cable
and MIB/TRAI (currently in front of the Chennai High Court). We find it difficult to
believe that even as the rest of Indian C&S TV will convert to Digital TV (DTH,
Digital Cable) from Analog Cable, Tamil Nadu will remain an exception. Therefore,
DAS is inevitable. Nonetheless, we see two potential sources of risk on account of
Arasu: (1) visibility on the timeline of a resolution to the aforementioned dispute is
low, and thus digitization in Tamil Nadu may be delayed (beyond our expected
Phase-III timelines). (2) Suns per-sub ARPU may be below estimates if Arasu is
allowed a DAS licence, given its strong position in TN and natural opposition to Sun.
The former is a reasonable probability but low impact risk; the latter is a potential
high impact risk given that TN is Suns largest market.
Zee: Over-indexed subs revenues and modest South presence

Zee delivered its best-ever domestic subs growth in FY12, the year it formed its
MediaPro distribution JV with Star India. The coming together of the #1 and #2
broadcasters in India was a leg-up for Zee, which derived significant benefits from
the JV: (1) improved transparency and understanding of the Indian Cable landscape
(complex at the time due to Analog Cable); (2) improved negotiating power versus
even large C&S distributors; and (3) the ability to push a maximum number of
Zee/Star channels on the distributor network (70-80 channel capacity on Analog
Cable in the real world). Digitization will drive improved channel capacity as well as
transparency in the Indian Cable system; however, the loss of negotiating power
given the breakup of MediaPro JV was keenly felt. Star did not feel the impact as
strongly given its acquisition of ESPN in India, which gives it the enviable #1
position in entertainment as well as #1 in sports broadcasting in India.
Page 22 | 20 May 2015
Figure 52: Leading channels and networks across Indian C&S TV segments
Netw ork
Channel
Segm ent
Leader
Runners-up
Leader
Runners-up
Hindi entertainm ent Star netw ork Zee netw ork
Star Plus
Colors
Hindi m ovie
Zee netw ork Star netw ork
Sony MAX Zee Cinem a
Bangla entertainment
Star netw ork Zee netw ork
Star Jalsha
Zee Bangla
Marathi entertainment
Zee netw ork TV18 netw ork
Zee Marathi Colors Marathi
Tamil entertainment
Sun netw ork Star netw ork
Sun TV
Star Vijay TV
Telugu entertainment
Sun netw ork Star netw ork Sun Gemini TV
Star Maa TV
Kannada entertainment
Sun netw ork TV18 netw ork Sun Udaya TV Colors Kannada
Malayalam entertainment Star netw ork Sun netw ork Star Asianet Sun Surya TV
All-India sports
Star netw ork Sony netw ork
Star Sports
Sony Six
Zee delivered a strong 20% CAGR in domestic subs revenues over FY13-14, led by
MediaPro JVs strong negotiating position as well as the contribution from complete
subs declaration in Phase-I/II DAS markets. Phase-I/II DAS had >75% contribution
from HSM (Hindi speaking markets), where Zee is strong. Zees subs growth
moderated to sub-10% levels in 9MFY15, with the MediaPro JV also dissolved
effective 1QFY15. From the yet high base in FY15E, we model a moderate c.14%
CAGR in Zees subs revenues over FY16E-18E led by its leading position in HSM,
partially negated by a relatively modest contribution of HSM to Phase-III DAS C&S
TV subs. Zees improved market share led by launch of &TV may not contribute
much to subs revenues in FY16E-17E with a 5-7% market share; however, we
model a 2%/5% incremental contribution in FY18E/19E with a 9% market share.
Stars second Hindi GEC, LifeOK, with c.12% market share contributes to subs
revenues but the carriage fee is also high, as per our channel checks.
Figure 53: Zee domestic subs revenue growth, FY13-18E (%)
30
26
19
20
14
13
9
10
FY2013
FY2014
FY2015E FY2016E FY2017E FY2018E
Page 23 | 20 May 2015
Content, competition and margins

Market share, ad growth do not always equal value
Zees film channel business unit provides a great example of how market share
and/or advertising growth alone is not the best proxy for value creation. The market
share of Zee Cinema, Zees flagship film channel, had been under pressure over
the last years the primary driver was competitor Stars aggression in the segment
including (1) revamping flagship film channel Star Gold and (2) launching ancillary
film channel Movies OK, supported by (3) long-term output deals with popular film
stars in India for satellite rights of their films. Zee responded by launching &pictures,
its ancillary film channel focused on contemporary films and an urban audience, in
FY14. &pictures delivered an 8-ppt market share gain in the first full year of
operation (FY15), and together with Zee Cinema helped drive market share gains in
Zees film channel franchise over FY14-15. Correspondingly, Zees film channels
delivered industry-leading advertising growth.
However, market share gains and strong advertising growth were largely negated
by extraordinary film rights inflation during this period. Film rights inflation during this
period partially reflected (1) recovery from very low pricing levels in FY10-11 but
more importantly, (2) structural change in competition for film content. The sharp
inflation in satellite rights (c.150% over FY11-14) negated any significant value
creation from &pictures; Zees film investment increased structurally to support
multiple channels across the network (including Zee TV, flagship entertainment
channel). This is not a critique of Zees expansion strategy the &pictures launch
helped contain potential value destruction through improved utilization of Zees
legacy film library, market share gains and increased ad inventory. It does show
growth is not the sole criteria of value creation.
Figure 54: Zee Cinema and &pictures market share, FY11-15 (%)
Figure 55: Popular film rights prices across Indian C&S TV

segments, FY11-14 (Rs mn)
30
Language
20
10
25
25
23
19
26
23
18
FY2011
FY2012
Zee Cinema (%)
FY2013
FY2014
FY2015
Hindi
South dubbed
Tamil
Telugu
Kannada
FY2011
150-250
NA
NA
NA
NA
FY2014
400-600
50-70
110-150
60-80
30-50
Zee Cinema + &pictures (%)
Structural changes in competition and long-term content cost inflation/investment

are equally critical to potential value creation for C&S broadcasters. Market share
gains and advertising growth led purely by rising content investment (regardless of
the performance and/or sustainability of investments) may not be value-accretive. In
this respect, subscription growth is a better proxy for value creation given (1) its
correlation to market share as well as market position in the long run (overall
performance of the broadcaster, which does not change materially yoy) and (2) a
more stable revenue stream. Suns subscription growth (catch-up revenues in
Phase-III DAS) led by its dominance in South regional broadcasting markets implies
greater value creation (or realization) in the medium term. In the example above,
the dependence of C&S broadcasters on film studios (ownership of film rights)
resulted in bidding wars for film content; as highlighted previously, IPR ownership of
content is also a key value driver for broadcasters.
Page 24 | 20 May 2015
Large broadcasters well-placed to manage content dynamics

The Indian C&S broadcasters under our coverage (Zee, Sun) have a large number
of channels (>30 each) and a comprehensive discussion on content across
channels is challenging. We focus on Entertainment + Movie channels (Hindi +
regional), given their dominant share in Indian C&S broadcasting and our coverage
broadcasters. All forms of content, given the highly creative nature of the industry
and led by viewers changing tastes and preferences, have low hit:flop ratios
(typically 20:80). Correspondingly, the financial returns from content can vary from
negative to extraordinary (Figure 56). Broadcasters, given that they are aggregators
of content into a platform (channel), are well placed to manage the volatility in
performance; a Hindi Entertainment channel typically has >10 programs in any
week. Large broadcasters, given their diversity of channels and IPR ownership of
content, are even better placed to manage the dynamics. Across Hindi networks,
fiction dominates with a c.65% share followed by films (c.25%) and non-fiction
(c.10%). We discuss the key trends in content below.
Figure 56: Volatility in financial returns from fiction content (%)
Fiction content
Cost of production (Rs mn/episode)
View ership (mn view ers)
Ad rates (Rs/mn view ers)
Ad rates (Rs/10 sec slot)
Ad inventory (mins)
Ad volumes (10 sec slots)
Advertising income (Rs mn)
Advertising EBITDA (Rs m n)
Advertising return (%)
Hit
1.0
10
18,000
180,000
6.0
36
6.5
5.5
548
Flop
1.0
1
15,000
15,000
6.0
36
0.5
(0.5)
(46)
Page 25 | 20 May 2015
Figure 57: Hindi Entertainment + Movie channels content share (%)
Films, 25
NonFiction, 10
Fiction, 65
Catering to the core female audience of Entertainment channels, fiction content

(notably dramas) drives appointment viewing during weekdays, valued by
advertisers for its reliability. Along with IPR ownership by broadcasters, which
helps control costs (Figure 58), fiction content is the key profitability driver of
broadcasters, with likely 5-10% fiction cost inflation ahead.
Balancing the female skew of Entertainment channels is non-fiction content,

viewed by family audience during weekends. The high cost of non-fiction
implies a limited share in program mix, but high impact is valued by advertisers
and drives modest profitability for broadcasters. Broadcasters manage with a
mix of 3-4 big format shows per annum and mix of low-cost shows.
Over the last few years, broadcasters have increasingly focused on the underserved male audience on Entertainment channels. A key trend is the
emergence of finite fiction/non-fiction series with focused script and high
production values, similar to films (male audience skew). However, success has
been limited. Broadcasters will continue to experiment, but there is scope for
both improved performance and productivity in finite series/non-fiction content.
Film content serves multiple purposes in a network: (1) used across

Entertainment and Movie channels; (2) high shelf life; (3) cross-marketing of
new fiction/non-fiction programs on the network; and (4) drive new (family)
audience to the network. Correspondingly, the cost is astronomical, also given
the IPR ownership with film studios. However, post sharp inflation during FY1014, film prices started correcting in 2HFY15, and will provide key support to
broadcaster margins from FY16E.
Figure 58: Operating metrics across content formats

Form at
Fiction
Time/episode (mins)
Cost/episode (Rs mn)
Frequency (per annum) #
Telecast
Audience skew
Shelf Life
Dubbing potential
Broadcaster IPR
Expected inflation (%)
Non-fiction
Figure 59: Indicative list of Hindi finite TV series, CY14

Film s #
TV Series
30
60-90
100-150
0.7-1.5
5-30
100-600
8-10
8-10
15-20
Weekdays Weekends Weekends
Female
Family
Male
Moderate
Low
High
Moderate
Moderate
High
Yes
Partial
No
5-10%
NA (10-15)%
Channel
Yudh
24 (India version)
Mahabharat
Everest
Maharashak
Airlines
Ajeeb Dastan
Pukaar
Episodes (#)
Sony TV
Colors
Star Plus
Star Plus
Zee TV
Star Plus
Life OK
Life OK
Cost (Rs m n/episode)
20
24
200
100
26
26
108
24
Rs30mn/60mins
Rs20mn/60mins
Rs8mn/30mins
NA
NA
Rs2.4mn/60mins
NA
Rs1.3mn/30mins
Figure 60: Top TV series and viewership on Hindi channels across formats, CY14
TV series
Diya Aur Bati Hum
Jodha Akbar
Ye Hai Mohabbatein
Sathiya Saath Nibhana
Yeh Rishta
Mahabharat
Tarak Mehta
Kumkum Bhagya
Sasural Simar Ka
Sapne Suhane
Fiction
Channel
Star Plus
Zee TV
Star Plus
Star Plus
Star Plus
Star Plus
Sab TV
Zee TV
Colors
Zee TV
View ers (m n) TV series

10.7
8.7
8.5
8.4
7.4
7.1
6.9
6.3
5.5
4.4
Non-fiction
Channel
Comedy Nights w ith Kapil

India's Got Talent 5
Fear Factor India
DID Little Masters 3
Big Boss 8
Jhalak Dikhla Ja
Dance India Dance 4
Kaun Banega Crorepati
Nach Baliye 6
Mad in India
Colors
Colors
Colors
Zee TV
Colors
Colors
Zee TV
Sony TV
Star Plus
Star Plus
Film s
Channel
View ers (m n) TV series

7.1
6.8
6.1
5.0
4.8
4.5
4.1
3.5
1.5
1.3
R Rajkumar
Krish 3
Ramleela
Main Tera Hero
Dhoom 3
Jai Ho
Singh Saab The Great
Ramaiya Vastavaiya
Gunday
Mary Kom
Colors
Sony TV
Sony TV
Zee TV
Sony TV
Star Plus
Colors
Zee TV
Sony TV
Colors
View ers (m n)
11.5
10.7
9.0
8.7
8.2
7.8
7.7
5.9
5.8
5.1
Regional markets differ only marginally on content

Regional markets being relatively smaller in size (Tamil, the largest regional market
in India, is around one-fourth the size of Hindi/national market), the cost of content
is also commensurately lower; fiction content in regional markets has budgets of
c. Rs0.1-0.2mn/30mins episode. Otherwise, the content dynamics are similar to the
Hindi market; fiction dominates followed by films and non-fiction. However, the
South Indian regional audience have greater affinity towards films, reflected in a
higher viewership share (c.30%); the number of Movie channels is lower, but films
form the core programming line-up of Entertainment channels. Regional market film
prices havent corrected, but inflation has moderated to 5-10% from 20-30% over
the last few years. A unique feature of regional content markets is dubbed content,
where high-production-value Hindi/national programs are dubbed in the regional
language. The success of such efforts so far (notably Balika Vadhu/Colors), also in
cost optimization, implies the trend is likely to continue.
Figure 61: South regional Entertainment + Movie channels content (%)
Films, 30
NonFiction, 10
Fiction, 60
Page 26 | 20 May 2015
Competition limited to existing players, but this can change

Our analysis of trends in network shares of the top 5 Indian broadcasters indicates
a consolidated market. The top broadcasters together have held around 65-70%
market share over the last few years. The trends across broadcasters are
somewhat random, led by strong intra-segment competition: (1) Star and Zee have
been structural gainers over the last few years, in no small part due to MediaPro
(their channel distribution JV), (2) Sony and TV18 have exhibited mixed
performance Sonys flagship namesake Hindi Entertainment channel has taken a
knock, offset by the strong performance of ancillary channel SAB TV and Hindi
Movies channel MAX; TV18 needs to work on improving the performance of its
acquired ETV regional channels. (3) Sun has consistently lost market share with
rising competition in South India regional broadcasting. Figure 62 shows the
consolidation among broadcasters in the last few years.
Figure 62: M&A-led consolidation in Indian C&S TV market
Aquirer
Target
Star India
Asianet
Turner Asia
Imagine TV
Zee Entertainment Ten Sports
Zee Entertainment 9X
Disney
UTV Softw are
Star India
ESPN-Star Sports
TV18
ETV - 50% stake
Viacom
ETV - 50% stake
Star India
Maa TV
Year
Key m arket/segm ent
2008
2009
2010
2010
2011
2012
2013
2015
2015
Malayalam, Kannada
Hindi Entertainment
Sports
Hindi Entertainment
Hindi Movies, Youth
Sports
Marathi, Bengali, Kannada
Marathi, Bengali, Kannada
Telugu
We are not aware of any significant new entrants on the horizon for now, which
implies that the Indian C&S TV segment remains in consolidation mode, with
competition limited among existing players. However, we also note that the potential
for new entrants in the market remains. For starters, we note the high growth
potential in the market. As highlighted previously, we model the TV advertising
market to expand by an 18% CAGR over FY16E-18E (led by improved economic
momentum) and 14% over the next decade. We model Pay-TV subscription market
to expand by a 15% CAGR over FY16E-18E, led by Phase-III digitization.
Moreover, a creative industry with expansion in underlying market opportunity
provides avenues for new entrants with disruptive content, filling up whitespaces left
over by existing players. We have seen examples of this in the past (Colors/TV18,
launched in FY08, which built a successful franchise on the back of social content).
Figure 63: Indian C&S TV market advertising and subs revenue
growth, FY13-18E (%)
30
21
20
20
14
12
10
20
16
18
16
13
9
10
7
FY2013
FY2014
FY2015E FY2016E FY2017E FY2018E
C&S TV subs growth (%)
C&S TV ad growth (%)
Page 27 | 20 May 2015
Also, large broadcaster returns (we prefer CROCI as the metric) remain best-inclass not just within the C&S TV value chain, but across the Indian media
industry. The sharp decline in Zees FY16E CROCI is entirely due to the &TV
channel launch, recovering in FY17E. Although the returns of legacy large
broadcasters cannot be extrapolated to new entrants given their bargaining power
over content producers and distributors, new entrants have to start somewhere. The
question is when we believe new investments may not be far behind with the
advertising recovery in place. This is important since new channels are dependent
on advertising revenues in the initial years of operations and do not receive any
subscription revenues (instead, they have to pay for carriage to distribution
companies). The entry barriers have been reduced with digitization, as Cable
network capacity has increased to 300-500 channels from 70-80 channels
previously. Cable MSOs can scale up capacity (up to c.1,000 channels) quickly and
at low cost (<Rs10mn/channel).
Figure 64: CROCI return profile of Zee and Sun, FY13-18E (%)
40
30
20
29
28
26
28
31
29
32
30
29
26
25
18
10
FY2013
FY2014
FY2015E FY2016E FY2017E FY2018E
Sun TV Network (%)
Zee Entertainment (%)
Few regional markets have potential for disruption

The potential for competition/new entrants in the market exists, but is not uniform
across all segments. For example, Hindi Entertainment/Movies segments already
have 8-10 sizable channels across large and small broadcasters; the space for new
entrants in constrained, at least in the near term. The Herfindahl-Hirschman Index
analysis (Page 13, Figure 29) also corroborates this view. We expect new entrants
to be rational and target markets with oligopoly characteristics, where there is
potential for disruption and a profitable entry. Few segments stand out: (1) Tamil
market has historically been monopolistic in nature, led by Sun TV. Sun Group
enjoyed dominance over cable distribution in the market; however, the distribution
field has levelled with the entry of DTH and Arasu Cable in the market. (2) Bangla
and Marathi markets are oligopolistic in nature, in no small measure due to
MediaPro (Star and Zee dominate the markets). (3) Finally, we see similar
competition potential in the Malayalam market as well.
Figure 65: Number of channels with 80% viewership, FY2011-15 (#)
50
40
30
20
10
42
40
18
50
48
42
22
26
FY2012
FY2013
26
28
FY2014
FY2015
FY2011
Hindi market
Tamil market
Source: SMV, Investec Securities research
Page 28 | 20 May 2015
Zee: The content powerhouse; margin traction post FY2016E

Zee is the #2 C&S TV broadcaster in India by market share, but in our view, rates
higher than Star (#1 broadcaster) in terms of content strategy and efficiency. Stars
market share lead is due to (1) a strong fiction content line-up in its Hindi
Entertainment channels, but also (2) outsized investments in regional/sports
channels (supported by global parent, News Corp). Correspondingly, Stars
operating margins are much below those of Zee (Figure 66), which maintains a
balance between its growth ambitions and profitability. Zees fiction slate consists of
dramas, but also a mix of comedy and mythology content (an area of strength). As
highlighted previously, all Entertainment networks (including Zee) own IPR of their
fiction content. What differentiates Zee from the rest is that it owns the majority of its
non-fiction content as well. Zee has a history of designing and producing its popular
non-fiction formats (Figure 67), including a number of sub-formats.
Figure 66: Star standalone sales and EBITDA margin, FY2010-14 (%)
60
30
24
20
40
20
14
10
50
20
10
39
19
23
27
FY2010
FY2011
FY2012
Standalone sales (Rs bn)
FY2013
FY2014
Standalone EBITDA margin (%)
Figure 67: Zee Entertainment owned non-fiction formats

Non-fiction form at
Type
Sa Re Ga Ma Pa
--SRGMP L'il Champs
--SRGMP Challenge
--SRGMP Singing Superstar
Dance India Dance
--DID L'il Masters
--DID Super Moms
--DID Doubles
Fear Files
Maharakshak
India's Best Dramebaaz
Gangs of Haseepur
Singing talent
Singing talent
Singing talent
Singing talent
Dancing talent
Dancing talent
Dancing talent
Dancing talent
Horror
Fantasy
Acting talent
Comedy
Source: ACE Equity, Investec Securities research
Sharp inflation in popular film content has been the only thorn in Zees content
strategy over the last couple of years. The inflation in film prices coupled with
fragmentation in the Hindi movie genre resulted in poor returns, not justifying the
investments across C&S TV broadcasters. FY15 was the flashpoint year between
large broadcasters and film studios, with satellite rights of many hit films (on the box
office) remaining unsold due to the valuation gap. The film studios relented, driving
a healthy correction in Hindi film rights prices and regional film rights inflation in
2HFY15. However, the need to support multiple channels with film content implied
Zee could not be away from the film rights market for long; it recently added new
film rights to its arsenal (Figure 68). Additionally, Zee recently entered into content
production through its 100%-owned subsidiary, Essel Vision, to have even better
control over its content requirements. Essel Vision has already proven itself in
successful productions of Hindi non-fiction programs and Marathi films.
Figure 68: Zee's acquisition of film rights, CY15E
Hindi
Regional
Market
The Lunchbox
Haider
Khoobsurat
The Shaukeens
Singh is Bling
Jazbaa
Dil Dhadakne Do
Bangistaan
Chirunavvula Chirujallu
Pandaga Chesko
Mukunda
Ala Ela
Timepass 2
Elizabeth Ekadashi
Lai Bhaari
Ekla Cholo Re
Uttama Villain
Rajini Murugan
Telugu
Telugu
Telugu
Telugu
Marathi
Marathi
Marathi
Bengali
Tamil
Tamil
Page 29 | 20 May 2015
Figure 69 shows the consolidated sales and EBITDA margins of the company.
However, analysis of Zees consolidated margins is constrained by (1) significant
start-up losses due to the &TV channel launch; and (2) the volatile financials of
Zees sports business unit (a small part of Zees operations). Therefore, we focus
on Zees adjusted financials (Figure 70). Notwithstanding strong revenue growth
(advertising led by robust market gains, subscription led by Phase-I/II DAS), Zees
EBITDA margins moderated to c.31% in FY15E, from 33-34% in FY13-14. Zees
aggressive expansion strategy, intense intra-segment competition and
corresponding steep content inflation were the key drivers behind the margin
correction. Going forward, we model renewed traction in Zees adjusted EBITDA
margins led by moderating content inflation (notably films), strong industry ad
growth and renewed subscription growth (implementation of Phase-III DAS).
However, FY16E presents an interesting margin conundrum.
Figure 69: Zee consolidated sales and EBITDA margin, FY13-18E
100
Figure 70: Zee adjusted (&TV, Sports) sales and margin, FY13-18E
40
26
75
27
25
22
23
16
50
100
40
34
33
31
29
30
30
30
75
30
20
50
20
10
25
81
25
37
44
47
57
66
32
FY2013
56
64
10
FY2014 FY2015E FY2016E FY2017E FY2018E
Consolidated sales (Rs bn)
48
42
38
FY2013
Consolidated EBITDA margin (%)
FY2014 FY2015E FY2016E FY2017E FY2018E
Adjusted sales (Rs bn)
Adjusted EBITDA margin (%)
Zees aggressive film accounting policy

Figure 71 shows Zees amortization policy across content formats. Zees film
accounting policy is aggressive given only c.20% cost amortization against >50% of
revenue generation in the first year of telecast (revenue-cost mismatch). Steep film
rights inflation (20-30% CAGR) and multiple film channels (including new launches
such as &pictures) have driven increased film investments for Zee. A large share of
these film investments remain on Zees balance sheet, reflected in the c.2.4x
increase in unamortized content costs over FY11-1HFY15, far outpacing peer Sun
TV. Assuming a fair accounting policy (60% cost amortization in the first year, 10%
thereafter), we estimate Zees FY14-15E EBITDA margins to be overstated by
c.200bps. However, as the prices of film rights decline and amortization policy starts
catching up, the overstatement moderates to c.100bps in FY16E. We believe Zees
FY17E EBITDA margin provides a fair representation of long-term trends.
Figure 71: Zee amortization policy across program formats
Figure 72: Zee, Sun unamortized content cost, FY11-15 (Rs bn)
15
Program
Film s
Fiction
Non-Fiction
Am ortization policy
Film rights are am ortized on a straight-line
basis over the licensed period or 60
m onths from the com m encem ent of
Programs (other than above) are amortized over
3 years, starting from the year of first telecast
as per management estimate of future potential
(80:10:10 as per company).
Reality show s, chat show s, events, current
affairs, game show s and sports rights are fully
expensed on telecast
10
11.7
5.4 4.5
7.3
5.6
6.3
6.2
5.5
FY2012
FY2013
FY2014
1HFY15
FY2011
Zee Entertainment
Page 30 | 20 May 2015
13.2
8.7
Sun TV Network
Sun: Large film library, margin erosion cycle bottomed-out

Although Sun has been present in the Indian C&S broadcasting market for as long
as Zee, its content strategy has been relatively weaker, notably on non-fiction
content. Notwithstanding the dependence on established international formats, Sun
has still struggled with the performance of non-fiction content across its network.
Sun has very strong relationships with popular fiction content studios in South India,
which was a robust entry barrier. However, competition notably national networks
such as Star and Zee effectively used regional language versions of their nonfiction formats (e.g. Dance India Dance on Zee) to drive viewership on their
channels and cross-market their fiction content. Suns extensive legacy film library
remains a key differentiator for the network, especially given the relative popularity
of film content in South India. As the only broadcaster in South India for the first
decade of its operation, Sun built a huge library of popular films.
Figure 73: Legacy film library of Sun and Zee networks (#)
10,000
7,500
5,000
8,000
2,500
3,500
Sun TV Network
Zee Entertainment
Suns EBIT margins declined from a peak of c.55% in FY11 to c.44% in FY15E led
by (1) weak performance in the broadcasting business (challenging ad market,
network market share losses, limited subscription gains from Phase-I/II digitization);
and (2) investments in new businesses (SunRisers IPL cricket franchise in FY14).
We focus on EBIT margins given Suns accounting policy on film amortization
(reported below-EBITDA despite it being an operating expense). We model EBIT
margins stabilising in FY16E-18E led by (1) strong subscription growth from PhaseIII DAS; (2) strong industry ad growth; and (3) moderating content inflation. As
already highlighted, we model a below-industry-average c.10% CAGR in Suns ad
revenues given a c.350bps loss in Suns network market share during this period,
but good enough for stable EBIT margins in the broadcasting business. Reduced
losses in Sports (a small part of Suns operations) should drive modest
improvement in consolidated EBIT margins in FY17E.
Figure 74: Sun consolidated sales and margin, FY13-18E (%)
60
50
46
44
44
45
45
27
31
35
24
45
30
15
19
22
FY2013
FY2014
FY2015E FY2016E FY2017E FY2018E
Consolidated EBIT margin (%)
Page 31 | 20 May 2015
Suns EBIT margins are overstated due to unique business model

Notwithstanding Suns dominant position in South India, its EBIT margins of c.45%
seem significantly out-of-line with Zees adjusted EBITDA margins of c.30%,
especially as we have argued that its subscription revenues remain under-indexed.
We highlight that Suns content business model is unique compared to other large
broadcasters in India. Unlike the commissioned model, where broadcasters buy
programs outright from content producers, Suns sponsored model envisages
entering into a partnership with content producers. Sun allocates a certain time-slot
on its channel to its content partner, who then produces content for the same in
collaboration with Sun. Sun and the content producer end up sharing the ad
inventory available on the program/slot (each 3mins/30min-slot). As shown in Figure
75, absolute EBIT/EBITDA remains largely unchanged across the two business
models but Suns margins are overstated by >10-ppt. Suns comparable margins
(32-35%) are at a modest premium to Zee.
Figure 75: EBITDA margins in sponsored and commissioned models
Sun netw ork
Sponsored
Content
producer
Zee netw ork

Com m issioned
Total revenues
--Advertising
--Subscription
--Others
Total expenses
--Direct cost
--Employee
--Overheads
--Film amortization
--Producer margin
EBIT/EBITDA
100
50
40
10
(55)
(10)
(10)
(15)
(20)
45
(35)
(25)
(5)
(5)
5
140
90
40
10
(95)
(35)
(10)
(25)
(20)
(5)
45
Op. M argin (%)
45
13
32
40
40
Page 32 | 20 May 2015
Figure 76: Content business model of Sun TV Network

Advertiser
6mins/hr
advertising
Sun netw ork
Advertising
revenue
6mins/hr advertising
6mins/hr
advertising
Content provider
Content/Programming
Subscription
revenue
Subscribers
Valuation: We prefer DCF methodology

We believe several factors preclude the use of multiples or relative valuations for
Indian C&S TV broadcasters notably (1) the nascent stage of development of C&S
TV broadcasting business models in India; (2) long-term high-growth markets from
both a subs and advertising perspective (versus global peers); and (3) depressed
near-term earnings due to new initiatives in investment mode (reflected in operating
losses). In our view, the variations in business models and accounting policies also
complicate matters, as discussed previously. Nonetheless, for the sake of
completeness, we provide the key financial metrics and valuation comparisons of
Indian and global C&S TV broadcasters in Figure 77. The FY16E-17E (CY15E-16E)
financials for Zee will be particular depressed due to large losses in &TV (new
flagship channel launch) and if at all, FY18E/CY17E would be a more normalized
year for comparison. We prefer the DCF valuation methodology in order to capture
(1) the emerging state of the Indian C&S TV market with long-term high-growth
potential; (2) the robust underlying profitability of legacy channels; and
(3) investments in new initiatives and their long-term profitability.
Figure 77: TV broadcasting global valuation comparables, CY14E-16E
Mcap
(US$ m n)
EV
(US$ m n)
EPS
CAGR (%)
Average
RoE (%)
CY2014E
P/E (X)
CY2015E
CY2016E
India
Zee Entertainment (Consensus)
Zee Entertainm ent (Investec)
Sun TV Netw ork (Consensus)
Sun TV Netw ork (Investec)
TV18 Broadcast
India average
4,698
4,698
2,246
2,246
914
4,515
4,515
2,101
2,101
963
20
13
17
12
NA
15
19
25
25
26
6
20
33.6
42.3
18.4
18.6
42.4
31.1
29.7
53.3
15.9
17.0
26.1
28.4
23.5
32.9
13.5
14.8
NA
21.2
22.7
22.9
12.4
12.6
24.3
19.0
19.8
27.6
10.4
11.3
14.6
16.7
14.8
18.5
8.5
9.7
NA
12.9
Asia
Surya Citra
Media Nusantra
Television Broadcast
BEC World
GMA Netw ork
Asia average
3,395
2,319
3,003
2,190
475
3,330
2,334
2,623
2,095
489
19
13
5
(1)
41
15
41
20
18
49
NA
32
30.9
16.9
16.5
16.4
28.6
21.9
27.0
15.7
15.6
18.2
21.0
19.5
21.9
13.3
15.0
16.6
14.3
16.2
21.9
11.7
10.1
8.5
8.4
12.1
18.9
10.5
9.9
8.8
7.0
11.0
15.4
9.0
9.3
8.6
5.1
9.5
31,473
26,106
14,178
69,295
16,731
3,321
1,596
38,191
37,875
20,817
82,938
16,650
3,193
1,957
21
10
8
14
11
12
7
12
30
68
20
21
47
4
8
28
21.6
12.2
17.9
21.7
19.2
20.0
13.5
18.0
17.9
11.3
17.8
19.7
17.0
17.6
12.5
16.3
14.8
10.0
15.3
16.7
15.5
16.1
11.7
14.3
11.4
8.8
8.2
12.3
14.2
9.2
7.9
10.3
11.6
8.7
8.4
12.1
12.3
8.3
7.7
9.9
10.6
8.2
7.9
11.0
11.1
7.7
7.5
9.1
Global
CBS Corp
Viacom
Discovery Communications
21st Century Fox
ITV Plc
Fuji Media
Nine Entertainment
Global average
EV/EBITDA (X)
CY2014E CY2015E CY2016E
Source: Factset consensus, Investec Securities estimates * prices as of May 19, 2015; EPS CAGR and average RoE over CY14E-16E
The investible universe in Indian C&S TV broadcasting is limited to large, mass

broadcasters given (1) scale (# of channels) and diversity (of market presence)
advantages in an emerging market; (2) control over content IPR (for the most part);
(3) bargaining power versus C&S TV distributors; and (4) potential for creative
experimentation and content cross-subsidy. Thus, we focus on broadcasters with
>10 channels in their network (2-3 flagship mass channels across Hindi and/or
regional broadcasting markets). Similar to the Indian TV market, Indian viewers are
also very young, with significant flux/change in viewership patterns quite the norm.
The scale and diversity of large broadcasters protects them from wide variations in
viewership patterns of individual channels. The relatively small size of the Indian
C&S TV broadcasting market and skew towards advertising revenues precludes
niche players. Pay-TV revenues need to grow exponentially for niche/premium
broadcasters to thrive, which will take time.
Page 33 | 20 May 2015
Zee: Initiate at HOLD with a fair value of Rs330/share

We initiate coverage on Zee with a HOLD rating and FY16E DCF-based fair value
of Rs330/share. Notwithstanding the strongest listed C&S TV broadcasting
franchise in India, valuations at c.34x FY17E P/E and c.27x FY18E P/E leave
limited upside potential. For our DCF valuation, we explicitly model our revenue and
margin assumptions over FY16E-25E. The robust c.18% EBITDA CAGR during this
period is as much driven by strong revenue growth as by the low base (&TV peak
operating losses in FY16E; c.40% EBITDA CAGR over FY16E-18E as &TV heads
to breakeven; 13% thereafter). We assume a WACC of 10.5%, at the low end within
our coverage, giving due respect to the structurally strong franchise and balanced
portfolio of channels (Entertainment, Movies, Regional, Niche, Sports and robust
International market presence). We model 6% terminal growth (3% GDP growth,
3% inflation rate, media growth at 1x nominal GDP growth), in line with our
coverage. We discuss a few specific aspects related to valuation below.
Zee completed a bonus issue of preference shares (face value of c.Rs20bn,

currently trading at a c.25% discount to face value) to shareholders in March
2014. We treat the preference shares on par with debt and preference
dividends as interest. The dividend payout to preference shareholders is not
available to equity shareholders so we adjust the earnings/EPS as well as
valuation in line with corporate finance first principals.
As discussed previously, Zees film accounting policy results in overstated

EBITDA margins. Our earnings estimates are also overstated by 3-7% in
FY16E-17E, before amortization policy catches up in FY18E. However, our
DCF valuation is not impacted by the same.
&TV and the Sports business unit are two key drivers of depressed earnings in
the near term. As discussed, we model &TV to break even in FY18E and incur
steep losses in the interim period. The Sports business unit will remain lossmaking in this rights cycle (until FY18E). However, our long-term assumptions
reflect nil option value for these businesses in our model.
Figure 78: DCF-based valuation of Zee Entertainment, FY16E (Rs/share)

(Rs m n)
EBITDA
Cash taxes
Working capital change
Capital Expnditure
Annual FCFF
Discount rate (%)
Discount year (#)
Discounted annual FCFF
Discounted cum ulative FCFF
Term inal grow th (%)
Exit FCF m ultiple (X)
Terminal FCFF
Discounted term inal FCFF
Enterprise fair value
Net debt/(cash)
Equity fair value
Num ber of shares (m n)
Zee stock fair value (Rs/share)
Term inal value contribution (%)
FY2016E-25E EBITDA CAGR (%)
FY2016E
FY2017E
FY2018E
FY2019E
FY2020E
FY2021E
9,396
14,677
18,289
20,546
28,121
35,702
(3,402)
(5,086)
(6,222)
(6,915)
(9,377)
(11,907)
(1,616)
(2,836)
(3,575)
(2,318)
(2,386)
(2,532)
(1,000)
(1,025)
(1,050)
(1,075)
(1,100)
(1,125)
3,377
5,730
7,442
10,238
15,258
20,137
10.5 Assum ed
1
2
3
4
5
3,377
5,186
6,095
7,588
10,234
12,223
86,837
6.0 Assum ed 3% GDP grow th w ith 3% WPI inflation
22.2
544,931
221,861
308,698
(4,656) Adjusted for Preference share @75p/Rs1 face value
313,354
962
326
72
18
FY2022E
37,657
(12,615)
(2,670)
(1,150)
21,222
FY2023E
39,202
(13,133)
(2,849)
(1,175)
22,045
FY2024E
41,495
(13,853)
(3,995)
(1,200)
22,448
FY2025E
42,255
(14,055)
(3,841)
(1,225)
23,134
6
11,658
7
10,959
8
10,099
9
9,419
FY2026E
44,790
24,522
Page 34 | 20 May 2015
Sun: Initiate at BUY with a fair value of Rs460/share

We initiate coverage on Sun with a BUY rating and FY16E DCF-based fair value of
Rs460/share. Implied valuation of c.19x FY17E P/E on our fair value is at a
significant discount to Zee. Although Suns franchise strength is marginally weaker,
it is already well-captured in valuations. For our DCF valuation, we explicitly model
our revenue and margin assumptions over FY16E-25E. The robust 10% EBIT
CAGR during this period is driven by strong subscription growth led by Phase-III/IV
of digitization but modest advertising growth, weighed down by pressures on market
share factored into our model. We assume a WACC of 11.5%, at the high end
within our coverage (100bps higher than Zee), a balancing act between a strong
cash flow generating franchise and operational (market share) and other
(legal/political) concerns. We model 6% terminal growth (3% GDP growth, 3%
inflation rate, media growth at 1x nominal GDP growth), in line with our coverage.
We discuss a few specific aspects related to valuation below.
The SunRisers IPL cricket franchise is loss-making and currently in investment

mode. We model breakeven in FY19E and our long-term assumptions reflect
nil option value for this business in our model.
Beyond fundamentals, Sun TV shares also react to non-operational news flow

and concerns regarding the promoter group. In particular, we highlight the CBI
(premier government investigation agency in India) investigation into the tenure
of erstwhile Telecom Minister, Dayanithi Maran, the brother of Kalanithi Maran
(Sun Group promoter). The investigation is focused on allegations of corruption
against Dayanithi Maran during his tenure and whether Sun Group was a
potential beneficiary of the alleged payoff. Maxis Group, a Malaysian group
involved in the investigations, has invested in Sun Direct (Sun Groups DTH
platform, sister company of Sun TV Network). Although Sun TV Network is not
directly involved, it has a commercial relationship with sister companies,
notably Sun Direct (subscription revenues). The recent sharp decline in Sun
TVs share price was due to the attachment of c.Rs3bn of company assets
concerned in the CBI investigation. Sun TV maintains that it has no connection
with the alleged crime.
Figure 79: DCF-based valuation of Sun TV Network, FY16E (Rs/share)

EBIT
D&A expense
Cash taxes
Working capital change
Capital Expnditure
Annual FCFF
Discount rate (%)
Discount year (#)
Discounted annual FCFF
Discounted cum ulative FCFF
Term inal grow th (%)
Exit FCF m ultiple (X)
Terminal FCFF
Discounted term inal FCFF
Enterprise fair value
Net debt/(cash)
Equity fair value
Num ber of shares (m n)
Sun stock fair value (Rs/share)
Term inal value contribution (%)
FY2016E-25E EBIT CAGR (%)
FY2016E
FY2017E
FY2018E
FY2019E
FY2020E
FY2021E
11,854
13,923
16,009
17,255
19,637
21,118
6,240
7,020
8,209
8,596
8,655
9,442
(4,347)
(5,015)
(5,665)
(6,087)
(6,924)
(7,454)
(380)
(739)
(856)
(757)
(1,054)
(1,051)
(6,445)
(11,693)
(10,102)
(8,998)
(8,702)
(10,471)
6,922
3,496
7,595
10,010
11,612
11,585
11.5 Assum ed
1
2
3
4
5
6,922
3,136
6,109
7,221
7,513
6,722
61,457
6.0 Assum ed 3% GDP grow th w ith 3% inflation rate
18.2
286,380
107,515
168,972
(11,247)
180,219
394
457
64
10
FY2022E
22,361
10,312
(7,889)
(1,042)
(11,495)
12,247
FY2023E
23,952
11,272
(8,439)
(1,178)
(12,613)
12,995
FY2024E
25,713
12,329
(9,045)
(1,272)
(13,832)
13,894
FY2025E
27,594
13,493
(9,693)
(1,372)
(15,163)
14,859
6
6,373
7
6,065
8
5,816
9
5,579
FY2026E
29,250
15,751
Page 35 | 20 May 2015
Sun T V N etwor k (Buy - TP: 460INR)
Sun TV Network (SUTV.NS)

India | Media
BUY
Banking on Phase-III digitization

INR35 1
Price: INR351.00
INR46 0
Target: INR460.00
Sun is the leading South India regional broadcaster led by (1) a diverse genre
presence and (2) the largest library of popular film content across the Indian
broadcasters. Rising competitive intensity in South India regional markets
has resulted in erosion in Suns market share (from a high base), but we
believe the cycle is nearing its end. Ad growth should recover ahead,
supported by an improved macro environment. Additionally, Sun will likely
reap strong gains in subscriptions led by catch-up revenues in Phase-III
digitization, which has a larger subs share from South India. All in all, the
franchise seems mispriced on c. 14x FY17E P/E. We initiate at Buy.
Sun likely to shine, led by South India broadcasting leadership, Phase-III

DAS. Sun has managed to hold onto its leading position in the South India
regional broadcasting market despite operational (high competitive intensity)
and other concerns. We believe while the concerns on competition and market
share losses are valid, Sun is also well positioned to capitalize on Phase-III
digitization led by (1) a low base (under-indexed subs revenue currently as
limited benefit accruing from Phase-I/II DAS) and (2) catch-up revenues given
larger subs share from South India in Phase-III DAS. We model a strong c.20%
CAGR in Suns domestic subs revenues over FY16E-18E.
Moderate ad growth, led by improved macro environment. Although we

believe Suns market share loss cycle is nearing an end, we conservatively
model a c. 350bps market share loss over FY16E-18E. However, an improved
macro environment should drive a c.18% CAGR in Indian C&S TV ad revenues
and c.10% CAGR in Suns ad revenues during this period. FY15 proved to be
the wake-up call for Sun, as it recognized the competitive threat and responded
with channel management shakeup and revamped content. Competition and
resultant content inflation/investments are relevant concerns, but Suns
conservative accounting policy implies the hit has already been factored into
>10pps decline in Suns EBIT margins over FY11-15E.
Forecast Total Return: 35.4%

Market Cap: INR138bn
EV: INR127bn
Average daily volume: 91k
Amit Kumar
+91 (22) 6136 7400
Initiate at BUY with Rs460 target price. We initiate on Sun with a DCF-based
fair value of Rs460, implying capital upside of 35% over the next 12 months.
The FY17E P/E valuation of c. 14x looks attractive on our conservative
assumptions. Additionally, the 4.3% FY16E dividend yield highlights the robust
cash flow generation in the franchise.
Financials and valuation
Year end: 31 March
Price Performance
2013A
2014A
2015E
2016E
2017E 500
19,230
14,091
13,086
10,347
7,096
22,236
15,097
14,166
10,914
7,480
24,425
16,952
16,093
11,562
7,746
26,656
18,094
17,302
12,785
8,438
30,603
450
20,943
20,161 400
14,750
9,735 350
EPS (norm. cont.) FD (INR)

FCFPS - FD (INR)
DPS (INR)
18.0
12.8
9.5
18.4
21.2
9.5
19.7
20.5
12.0
21.4
19.9
15.0
24.7
11.0
18.0
PE (normalised) (x)
EV/sales (x)
EV/EBITDA (x)
FCF yield (%)
Dividend yield (%)
19.5
6.6
9.0
3.6
2.7
19.1
5.7
8.4
6.1
2.7
17.9
5.2
7.5
5.8
3.4
16.4
4.8
7.0
5.7
4.3
14.2
4.2
6.1
3.1
5.1
Revenue (INRm)
EBITDA (INRm)
EBITA (INRm)
PBT (normalised) (INRm)
Net Income (normalised) (INRm)
Source: Company accounts/Investec Securities estimates
Page 36 | 20 May 2015 | Sun TV Network
300
250
May-14
Price
____________________________
Aug-14
Nov-14
Feb-15
May-15
1m
3m
12m
(2.3)
(18.4)
(17.6)
Price rel to India S&P BSE 500 - BSE India(1.6)

(Indian (15.0)
Rupee) (30.8)
____________________________
Source: FactSet
Figure 80: Company description of Sun TV Network
Figure 81: Catalysts for Sun TV Network
Sun TV Netw ork, part of the Sun Group, is the dominant

player in the South regional broadcasting market. Sun has
>30 channels covering genres such as entertainment,
movies, music, kids, new s, comedy et al in the four South
Indian markets (Tamil, Telugu, Kannada and Malayalam). Sun
is in a strong footing across its markets barring Malayalam.
Sun expanded its broadcasting operations to cover FM Radio
in 2007, w ith a pan-India presence and strong position in
South markets. Sun entered into Indian Sports market in
2013, buying the Hyderabad franchise of popular Indian
Premier League (IPL, club-format cricket league in India). Sun
has the largest film library of all broadcasters in India.
Positive Catalysts
Timely and successful completion of Phase-III DAS
Moderation in market share losses in key markets
Moderation in film rights cost inflation
Negative Catalysts
Continued high competitive intensity in South markets
Delays in Phase-III DAS, possible due to multiple reasons
Competition forcing Sun to invest heavily in content
Figure 82: Sun TV Network's revenue breakdown, FY14 (%)
Figure 83: Sun segment revenue and EBIT, FY14 (Rs bn)
20
Others, 12
15
10
Subscription,
35
Advertising,
54
19.8
10.4
2.5
Core broadcasting
Other segments
Revenue
EBIT
Source: Company accounts
Figure 84: Sun consolidated sales and growth, FY13-18E

20
15
20
50
15
45
10
Figure 85: Sun consolidated EBIT and margin, FY13-18E
60
16
0.1
60
46
44
44
45
45
15
15
45
10
10
30
15
30
4
15
19
22
24
27
31
35
10
-
FY2013
FY2014 FY2015E FY2016E FY2017E FY2018E
Sales growth (%, RHS)
Source: Investec Securities estimates/Company accounts
10
11
12
14
16
FY2013
FY2014 FY2015E FY2016E FY2017E FY2018E
Consolidated EBIT (Rs bn)
EBIT margin (%, RHS)
Summary Financials
(INRm)
Year end: 31 March
Income Statement
Revenue
EBITDA
Depreciation and amortisation
Operating profit
Other income
Net interest
Share-based-payments
PBT (normalised)
Impairment of acquired intangibles
Non-recurring items/exceptionals
PBT (reported)
Taxation
Minorities & preference dividends
Discontinued/assets held for sale
Net Income (normalised)
Attributable profit
EPS (reported)
EPS (norm., cont.) FD (INR)
EPS (norm., cont., IAS19R adj.) FD
DPS (INR)
Average number of group shares - FD (m)
Average number of group shares (m)
Total number of shares in issue (m)
2013
19,230
14,091
4,417
9,674
-673
10,347
0
10,347
3,306
-54
7,096
18.0
18.0
9.5
394
394
394
2014
22,236
15,097
4,783
10,314
-600
10,914
220
11,134
3,682
-28
7,480
19.0
18.4
9.5
394
394
394
2015E
24,425
16,952
6,281
10,671
-891
11,562
0
11,562
3,815
0
7,746
19.7
19.7
12.0
394
394
394
2016E
26,656
18,094
6,240
11,854
-931
12,785
0
12,785
4,347
0
8,438
21.4
21.4
15.0
394
394
394
2017E
30,603
20,943
7,020
13,923
-827
14,750
0
14,750
5,015
0
9,735
24.7
24.7
18.0
394
394
394
Cash Flow
Operating profit
Depreciation & amortisation
Other cash and non-cash movements
Change in working capital
Operating cash flow
Interest
Tax paid
Dividends from associates and JVs
Cash flow from operations
Maintenance capex
Free cash flow
Expansionary capex
Exceptionals and discontinued operations
Other financials
Acquisitions
Disposals
Net share issues
Dividends paid
Change in net cash
Net cash/(debt)
FCFPS - FD (INR)
2013
9,674
-4,417
-86
-1,926
12,752
359
-4,062
9,049
-4,037
5,039
0
-3,779
1,201
4,594
12.8
2014
10,314
-4,783
-418
-710
14,764
730
-2,817
12,677
-4,305
8,373
0
-4,265
4,095
8,689
21.2
2015E
10,671
-6,281
-891
-481
16,471
891
-3,815
13,546
-5,456
8,090
0
-5,533
2,557
11,247
20.5
2016E
11,854
-6,240
-931
-380
17,714
931
-4,347
14,298
-6,445
7,854
0
-6,916
938
12,184
19.9
2017E
13,923
-7,020
-827
-739
20,204
827
-5,015
16,016
-11,693
4,323
0
-8,299
-3,976
8,208
11.0
Balance Sheet
Property plant and equipment
Intangible assets
Investments and other non current assets
Cash and equivalents
Other current assets
Total assets
Total debt
Preference shares
Other long term liabilities
Provisions & other current liabilities
Pension deficit and other adjustments
Total liabilities
Net assets
Shareholder's equity
Minority interests
Total equity
Net working capital
NAV per share (INR)
2013
8,564
5,233
2,005
4,594
6,166
32,396
0
0
-3,290
-3,290
29,106
27,854
1,252
29,106
8,710
70.7
2014
7,976
5,775
2,121
8,689
4,733
35,636
0
0
-3,342
-3,342
32,294
30,954
1,340
32,294
7,734
78.5
2015E
7,714
5,211
2,121
11,247
5,076
38,016
0
0
-3,508
-3,508
34,508
33,168
1,340
34,508
8,215
84.2
2016E
7,620
5,510
2,121
12,184
5,451
39,803
0
0
-3,774
-3,774
36,030
34,690
1,340
36,030
8,595
88.0
2017E
7,635
10,168
2,121
8,208
5,861
41,519
0
0
-4,053
-4,053
37,465
36,126
1,340
37,465
9,333
91.7
Source: Company accounts, Investec Securities estimates
Selection.Ta bles(1). Range.Fiel ds.U pdate
Calendarised Valuation
Calendar PE (x)
Calendar Price/NAVPS (x)
EV/sales (x)
EV/EBITDA (x)
FCF yield (%)
Dividend yield (%)
Year end: 31 March

2013
2014
2015E
2016E
19.2
4.6
5.9
8.6
5.5
2.7
18.1
4.2
5.3
7.7
5.9
3.2
16.8
4.0
4.9
7.1
5.7
4.1
14.7
3.9
4.3
6.3
3.8
4.9
Ratios and Metrics

Ratios and metrics
Revenue growth (y-on-y) (%)
EBITDA growth (y-on-y) (%)
Net income (normalised) growth (yoy)
EPS (normalised) growth (y-on-y) (%)
FCFPS growth (y-on-y) (%)
NAVPS growth (y-on-y) (%)
DPS growth (y-on-y) (%)
Interest cover (x)
Net debt/EBITDA (x)
Net debt/equity (%)
Net gearing (%)
Dividend cover (x)
EBITDA margin (%)
Operating profit margin (%)
ROE (%)
ROCE (%)
NWC/revenue (%)
Tax rate (normalised) (%)
Tax rate (reported) (%)
Year end: 31 March

2013
4.1
(0.4)
2.4
2.4
127.2
10.9
0.0
19.4
(0.3)
(15.8)
(18.7)
1.9
73.3
68.0
25.5
45.3
(31.9)
2014
15.6
7.1
5.4
2.3
66.2
11.1
(0.0)
23.6
(0.6)
(26.9)
(36.8)
1.9
67.9
63.7
24.2
34.8
(33.1)
2015E
9.8
12.3
3.6
6.7
(3.4)
7.2
26.3
18.1
(0.7)
(32.6)
(48.4)
1.6
69.4
65.9
23.4
33.6
(33.0)
2016E
9.1
6.7
8.9
8.9
(2.9)
4.6
25.0
18.6
(0.7)
(33.8)
(51.1)
1.4
67.9
64.9
24.3
32.2
(34.0)
2017E
14.8
15.7
15.4
15.4
(45.0)
4.1
20.0
24.4
(0.4)
(21.9)
(28.1)
1.4
68.4
65.9
26.9
30.5
(34.0)
Target Price Basis

DCF valuation
Key Risks
(1) Faster-than-expected market decline; (2) delays in Phase-III DAS; (3) promoter risk and; (4) performance of new initiatives
Zee Entertainment (Hol d - T P: INR)
Zee Entertainment (ZEE.NS)

India | Media
HOLD
Robust franchise, but factored into a rich valuation

INR31 6
Price: INR316.00
INR33 0
Target: INR330.00
Zee has the strongest franchise among the listed broadcasters in India, led by
(1) a diverse national presence and (2) a robust content strategy, as well as
efficient execution. The aggressive market strategy of renewed content
investments and new channel launches has led to >250bps gain in network
market share and above-industry ad growth over FY12-15E. However, the
marginal utility of market share gains is moderating, as highlighted by the
recent &TV channel launch. Zees over-indexed subscription revenues imply
moderate growth from Phase-III digitization going ahead. All in all, we see the
robust franchise as factored into the valuation of c.27x FY18E P/E. Hold.
Robust headline performance led by market share gains. Driven by a new

philosophy of lead fragmentation, or get fragmented, Zees aggressive market
strategy has been driven by renewed content investments and new channel
launches, leading to improved network market share and above-industry ad
growth. However, we are concerned by the reducing marginal utility of market
share gains. The recent &TV launch will contribute to growth but not value at its
current c.4.5% market share (this needs to double, on our analysis). Ad growth
momentum should be supported by an improved macro environment.
Moderate growth in subs revenues led by Phase-III DAS. Zees strong subs
growth over FY12-14 was driven by (1) the MediaPro distribution JV with Star
India (#1 broadcaster in India) and (2) Phase-I/II digitization with high >75%
contribution from HSM (Hindi Speaking markets), where Zee is strong. With the
MediaPro JV being dissolved and a high base in FY15E, expected moderate
growth in Zees subs revenues will be led by Phase-III digitization.
A content powerhouse, but aggressive accounting policy to catch-up. Zee

is structurally the strongest content franchise in India, led by IPR ownership of
the majority of its non-fiction content (other large broadcasters in India licence
rights to international formats). However, historical sharp inflation in film costs
not captured in historic EBITDA margins due to an aggressive accounting policy
will catch up over FY16E-17E, pressurizing reported margins.
Forecast Total Return: 6.4%

Market Cap: INR304bn
EV: INR305bn
Average daily volume: 247k
Amit Kumar
+91 (22) 6136 7400
Initiate with HOLD and Rs330 target price, which implies 6.4% capital upside
on a 12-month view. Peak &TV operating losses in FY16E imply near-term
valuations offer little value. P/Es of c.34x FY17E and c.27x FY18E also look
rich and at a significant premium to historical levels.
Financials and valuation

Revenue (INRm)
EBITDA (INRm)
EBITA (INRm)
PBT (normalised) (INRm)
Net Income (normalised) (INRm)
EPS (norm. cont.) FD (INR)
FCFPS - FD (INR)
DPS (INR)
PE (normalised) (x)
EV/sales (x)
EV/EBITDA (x)
FCF yield (%)
Dividend yield (%)
Year end: 31 March

2013A
2014A
2015E
2016E
2017E 400
36,996
9,543
9,144
10,519
7,196
44,217
12,043
11,542
13,191
8,820
47,099
11,706
11,118
12,642
7,114
57,155
9,396
8,821
10,458
5,640
65,874
14,677
14,040
15,636
9,134
7.5
4.2
2.0
9.2
3.6
2.0
7.4
5.8
4.0
5.8
3.7
6.0
9.4
6.1
8.0
42.1
8.8
34.1
1.3
0.6
34.4
7.4
27.0
1.1
0.6
42.7
6.9
27.8
1.8
1.3
54.1
5.7
34.6
1.2
1.9
33.6
4.9
22.2
1.9
2.5
Source: Company accounts/Investec Securities estimates
Page 40 | 20 May 2015 |
Price Performance
380
360
340
320
300
280
260
240
May-14
Price
____________________________
Aug-14
Nov-14
Feb-15
May-15
1m
3m
12m
(3.8)
(11.7)
9.6
(8.0)
Price rel to India S&P BSE 500 - BSE India(3.1)
(Indian Rupee)
____________________________
(8.0)
Source: FactSet
Figure 86: Company description of Zee Entertainment
Figure 87: Catalysts for Zee Entertainment
Zee Entertainment, part of the Essel group, is the secondlargest broadcaster in India w ith presence across
Hindi/national, regional and English/niche segments. Zee has
>40 channels covering genres such as entertainment,
movies, music, sports and niche across languages. Zee
channels hold leadership position in non-South regional
markets and robust position in Hindi markets. Zees sports
franchise w as acquired from Dubai-based Taj TV in FY2010.
Zee is the pioneer in distributing Indian content in global
markets, targeting the NRI (Non-Resident Indian) audience.
Lately, Zee has expanded its international offerings to
include Indian content dubbed in local languages.
Positive Catalysts
Stronger-than-expected market share and ad grow th
Timely and successful completion of Phase-III DAS
Improved content efficiency led by Essel Vision
Negative Catalysts
Inability to scale up &TV market share to 8-9%
Delays in Phase-III DAS, possible due to multiple reasons
Weak 1QFY16 results update in July 2015
Figure 88: Zee Entertainment's revenue breakdown, FY14 (%)
Figure 89: Zee segment revenue and EBIT, FY14 (Rs bn)
40.0
Others, 5
30.0
20.0
Subscription,
41
Advertising,
54
37.7
10.0
12.4
6.5
Core broadcasting
(1.0)
Sports broadcasting
(10.0)
Revenue
EBIT
Figure 90: Zee consolidated sales and growth, FY13-18E
Figure 91: Zee consolidated EBITDA and margin, FY13-18E
100
75
22
23
21
20
15
50
7
25
37
44
47
57
66
40
20
30
15
20
10
10
81
FY2014 FY2015E FY2016E FY2017E FY2018E
Sales growth (%, RHS)
Page 41 | 20 May 2015 | Zee Entertainment
40
26
27
25
22
23
16
30
20
10
10
-
FY2013
12
12
15
18
FY2013
FY2014 FY2015E FY2016E FY2017E FY2018E
Consolidated EBITDA (Rs bn)
EBITDA margin (%, RHS)
Summary Financials
(INRm)
Year end: 31 March
Income Statement
Revenue
EBITDA
Depreciation and amortisation
Operating profit
Other income
Net interest
Share-based-payments
PBT (normalised)
Impairment of acquired intangibles
Non-recurring items/exceptionals
PBT (reported)
Taxation
Minorities & preference dividends
Discontinued/assets held for sale
Net Income (normalised)
Attributable profit
EPS (reported)
EPS (norm., cont.) FD (INR)
EPS (norm., cont., IAS19R adj.) FD
DPS (INR)
Average number of group shares - FD (m)
Average number of group shares (m)
Total number of shares in issue (m)
2013
36,996
9,543
399
9,144
1,375
10,519
0
10,519
3,337
-14
7,196
7.5
7.5
2.0
958
958
954
2014
44,217
12,043
501
11,542
1,649
13,191
0
13,191
4,291
-21
8,820
9.2
9.2
2.0
960
960
960
2015E
47,099
11,706
587
11,118
1,524
12,642
0
12,642
4,113
0
7,114
7.4
7.4
4.0
962
962
964
2016E
57,155
9,396
575
8,821
1,637
10,458
0
10,458
3,402
0
5,640
5.8
5.8
6.0
966
966
968
2017E
65,874
14,677
637
14,040
1,596
15,636
0
15,636
5,086
0
9,134
9.4
9.4
8.0
970
970
972
Cash Flow
Operating profit
Depreciation & amortisation
Other cash and non-cash movements
Change in working capital
Operating cash flow
Interest
Tax paid
Dividends from associates and JVs
Cash flow from operations
Maintenance capex
Free cash flow
Expansionary capex
Exceptionals and discontinued operations
Other financials
Acquisitions
Disposals
Net share issues
Dividends paid
Change in net cash
Net cash/(debt)
FCFPS - FD (INR)
2013
9,144
-399
-1,034
-2,342
7,542
853
-3,669
4,726
-715
4,011
0
-601
-1,663
2,017
14,353
4.2
2014
11,542
-501
-716
-4,904
8,072
1,108
-4,242
4,938
-1,465
3,473
-9
825
-2,244
-18,052
-3,699
3.6
2015E
11,118
-587
-1,524
-2,153
9,553
108
-4,113
5,548
0
5,548
0
4
-2,247
3,305
-394
5.8
2016E
8,821
-575
-1,637
-1,616
7,779
221
-3,402
4,598
-1,000
3,598
0
4
-4,513
-910
-1,304
3.7
2017E
14,040
-637
-1,596
-2,836
11,842
180
-5,086
6,935
-1,025
5,910
0
4
-6,797
-882
-2,187
6.1
Balance Sheet
Property plant and equipment
Intangible assets
Investments and other non current assets
Cash and equivalents
Other current assets
Total assets
Total debt
Preference shares
Other long term liabilities
Provisions & other current liabilities
Pension deficit and other adjustments
Total liabilities
Net assets
Shareholder's equity
Minority interests
Total equity
Net working capital
NAV per share (INR)
2013
2,848
7,127
601
14,381
6,678
50,558
-28
0
-11,382
-11,410
39,148
39,115
33
39,148
15,681
40.8
2014
4,105
7,625
884
16,500
8,888
60,317
0
-20,199
-12,850
-33,049
27,268
27,207
61
27,268
21,505
28.3
2015E
3,518
7,625
884
19,805
9,180
66,529
0
-20,199
-16,457
-36,656
29,873
29,812
61
29,873
21,392
31.0
2016E
3,943
7,625
884
18,895
9,502
70,303
0
-20,199
-21,383
-41,582
28,720
28,659
61
28,720
20,725
29.7
2017E
4,330
7,625
884
18,012
9,856
73,871
0
-20,199
-24,913
-45,112
28,759
28,698
61
28,759
21,258
29.6
Page 42 | 20 May 2015 |
Selection.Ta bles(1). Range.Fiel ds.U pdate
Calendarised Valuation
Calendar PE (x)
Calendar Price/NAVPS (x)
EV/sales (x)
EV/EBITDA (x)
FCF yield (%)
Dividend yield (%)
Year end: 31 March

2013
2014
2015E
2016E
36.0
10.1
7.7
28.5
1.2
0.6
40.3
10.4
7.0
27.6
1.7
1.1
50.9
10.6
6.0
32.7
1.3
1.7
37.0
10.7
5.1
24.3
1.7
2.4
Ratios and Metrics

Ratios and metrics
Revenue growth (y-on-y) (%)
EBITDA growth (y-on-y) (%)
Net income (normalised) growth (yoy)
EPS (normalised) growth (y-on-y) (%)
FCFPS growth (y-on-y) (%)
NAVPS growth (y-on-y) (%)
DPS growth (y-on-y) (%)
Interest cover (x)
Net debt/EBITDA (x)
Net debt/equity (%)
Net gearing (%)
Dividend cover (x)
EBITDA margin (%)
Operating profit margin (%)
ROE (%)
ROCE (%)
NWC/revenue (%)
Tax rate (normalised) (%)
Tax rate (reported) (%)
Year end: 31 March

2013
21.7
29.0
22.2
23.5
(6.4)
15.2
34.1
(6.7)
(1.5)
(36.7)
(57.9)
3.7
25.8
24.7
18.4
42.4
(31.7)
2014
19.5
26.2
22.6
22.3
(13.6)
(30.6)
(0.5)
(7.0)
0.3
13.6
11.9
4.6
27.2
26.1
32.4
48.6
(32.5)
2015E
6.5
(2.8)
(19.3)
(19.5)
59.4
9.3
99.9
(7.3)
0.0
1.3
1.3
1.8
24.9
23.6
23.9
45.4
(32.5)
2016E
21.4
(19.7)
(20.7)
(21.0)
(35.4)
(4.3)
50.0
(5.4)
0.1
4.5
4.3
1.0
16.4
15.4
19.7
36.3
(32.5)
2017E
15.3
56.2
61.9
61.3
63.6
(0.3)
33.3
(8.8)
0.1
7.6
7.1
1.2
22.3
21.3
31.8
32.3
(32.5)
Target Price Basis

DCF valuation
Key Risks
(1) &TV performance, (2) delays in Phase-III DAS, (3) sharp content inflation and (4) market share gains/losses
Page 43 | 20 May 2015 |
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Expected total return

12m performance
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102
36
Stock ratings for Indian stocks
Stock ratings for research produced by Investec Bank plc

12m performance
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Buy
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Count
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2
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Stock ratings for research produced by Investec Securities Limited

All stocks
Corporate stocks
12m performance
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Count
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24
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5
21%
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22
34%
4
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18
28%
3
17%

*For African countries excluding South Africa, ratings are based on the 12m implied US dollar expected total return (ETR). This is
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Company disclosures
Sun TV Network
Zee Entertainment
Key: Investec has received compensation from the company for investment banking services within the past 12 months,
Investec expects to receive or intends to seek compensation from the company for investment banking services in the next 6
months, Investec has been involved in managing or co-managing a primary share issue for the company in the past 12 months,
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Limited holds 1% or more of a derivative referenced to the securities of the company
Page 44 | 20 May 2015 |
Recommendation history (for the last 3 years to previous days close)

Zee Entertainment (ZEE.NS) Rating Plotter as at 20 May 2015
350
300
250
200
150
100
50
0
Price
Target
Buy
Hold
Sell
Not Rated
Source: Investec Securities / FactSet

Sun TV Network (SUTV.NS) Rating Plotter as at 20 May 2015
450
400
350
300
250
200
150
100
50
0
Price
Target
Buy
Hold
Sell
Not Rated
Source: Investec Securities / FactSet
Page 45 | 20 May 2015 |
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(Investec) India C&S TV Broadcasting - SR2PIN - 112750

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20 May 2015

India C&S TV broadcasting

India C &S TV br oadc asti ng :

So whats there to watch on TV tonight?

Broadcasters benefit from structural strengths. The Indian C&S TV market

Near-term cyclical recovery in ad market. A stable Central government in

Digital transition to drive subscription revenues. The C&S TV distribution

Robust return, cash-flow generating franchises. Large C&S TV broadcasters

Page 2 | 20 May 2015

Structure of Indian C&S TV market

Source: Investec Securities research

Figure 2: Global TV subs by technology, CY14 (mn)

Figure 3: Indian TV subs by technology, FY14 (mn)

Source: FICCI-KPMG 2015 report, Investec Securities research

Page 3 | 20 May 2015

Source: Investec Securities estimates

Notwithstanding already high c.80% penetration of C&S TV in India, growth

Figure 4: Global C&S TV subs by technology, CY14-20E (mn)

Figure 5: Indian C&S TV subs by technology, FY14-20E (mn)

Source: FICCI-KPMG 2015 report, Investec Securities research

Source: Investec Securities estimates

Source: Investec Securities estimates

Page 4 | 20 May 2015

Indian C&S broadcasting is a very hyper-local market catering to the linguistic

Figure 7: Genre-wise Indian C&S TV market, CY14 (%)

Source: FICCI-KPMG 2015 Report, Investec Securities research

Source: FICCI-KPMG 2015 report, Investec Securities research

Page 5 | 20 May 2015

Global TV broadcasting markets have a wide spectrum of private broadcasters,

Figure 9: Top broadcasters in India, FY14 (%)

Figure 10: Pay-TV broadcasters economics in India, FY14 (Rs mn)

Source: Industry data, Investec Securities research

Source: Investec Securities research / Company accounts * EBIT as Sun reports

The relationship between content producers and broadcasters is governed by

Source: Investec Securities research / Company accounts

Page 6 | 20 May 2015

Bottom line: Attractive position of Pay-TV broadcasting in India

The emerging state of the Indian economy and consequent limited

The unorganized, fragmented Cable ecosystem in India implies that Pay-TV

Zee Entertainment: Second-largest broadcaster in India

Sun TV Network: Largest regional (South) broadcaster in India

Page 7 | 20 May 2015

Zee Entertainm ent

Sun TV Netw ork - regional

Zee TV, &TV, Z Anmol, Zindagi, Z Smile

Sun TV, Gemini TV, Udaya TV, Surya TV

Source: Investec Securities research

Page 8 | 20 May 2015

Advertising: Near-term cyclical recovery

Figure 14: Category-wise spends on Indian C&S TV, CY13-14 (%)

FY2012 FY2013 FY2014 FY2015 FY2016EFY2017EFY2018E

Source: GroupM India 2015 report, Investec Securities estimates

Source: Pitch-Madison 2015 report, Investec Securities estimates

The strongest support for (discretionary) consumption and Indian media ad

Figure 16: Impact of crude price decline on FMCG financials

Source: Bloomberg, Investec Securities research

Page 9 | 20 May 2015

Source: Investec Securities estimates

Long-term growth potential of Indian C&S TV ad market

Figure 18: Long-term Indian media ad growth forecast, FY15-25E (%)

Food and beverages *

Prepared meals and intoxicants

Source: Central Statistics Office, Investec Securities research * excluding prepared