Why DISH TV is still a speculative bet-negative equity, cash burn..

Earlier, I blogged about the irrational exuberance in the valuations of Dish TV as reflected by high EV/subscriber, which even exceeded the replacement cost (http://financeandcapitalmarkets.blogspot.in/2012/02/each-dishtv-subscriber-worth-rs-8000.html). Given that nea

Some points to note from the Sep-12 earnings release(http://www.dishtv.in/Library/Images/EarningsReleasefortheQuarterEndedSeptember30,2012.pdf) are

1. They are STILL playing the subsidy game(not passing on cost increase due to rupee depreciation etc to the subscriber)-increase in SAC from Rs 2145 in earlier quarter to Rs 2273 now. 
2. New adds may be of lower quality yet not be recognized as churn. As announced recently, all new subscribers will get 70 FTA(free to air) channels for 4years IF they recharge for minimum Rs 200 in period of 6months. Given the SAC of Rs 2300 odd now, the minimum revenue they will get in 4years is Rs 200*8=Rs 1600, that too after entertainment tax/content cost etc would be max Rs 1000 or so. Breakeven will not happen if subscribers cotton on to this...
3. Distribution network is 1480 distributors, 114000 dealers, 8567 towns supported by 4 call centres/1600 agents/11 languages. This network is somewhat hard to replicate, and an ingredient of the valuation given to them. But is it worth even 800 crores??
4. MD&A(http://www.dishtv.in/Library/Images/AnualReport2011-12/ManagementDiscussionandAnalysis.pdf)  and investor presentation(http://www.dishtv.in/Library/Images/CompanyPresentation_Oct2012.pdf) both focus on irrelevant metrics and gloss over the earlier aggressive accounting(till FY13, STB was depreciated over 5years but the upfront payment was amortized over 3yrs) and mounting losses. 

On an active base of 10MM subscribers(gross subscribers 13.9MM), the company is valued at an EV of Rs 9600 crores(Rs 1600crs debt consolidated FY12 + 8000crores odd equity). That amounts to Rs 9600/active subscriber or Rs 6900/gross subscriber. Given that the SAC is itself just Rs 2273, and ARPU Rs 159/month(of which hardly 40% accrues to company after content costs etc), this is really irrational valuation.

There are solid academic research like that of Ashwath Damodaran(http://people.stern.nyu.edu/adamodar/pdfiles/Seminars/AIMR3.pdf) on valuing companies in distress/loss making companies. But it is still hard to support such valuation levels. Maybe investors are in for a hard landing.