Mumbai : Videocon, which started its direct-to-home (DTH) operations in the second half of last year under the brand name of Videocon D2H, plans to tie up with those already in the market to supply those set-top boxes (STBs).

Along with its regular DTH operations, this deal would provide another revenue generating vertical to Videocon .The Company is in talks with several operators, said Anil Khera, CEO of Bharat Business Channel Ltd, the Videocon subsidiary for its DTH business. "We are at a nascent stage in the discussions, so we can't name the operators, but we are talking to two leading DTH players," Khera said.

He added balancing the two lines of production - one for Videocon D2H and another for other companies - would not be difficult, as Videocon's yearly production capacity of two million units in Aurangabad can be expanded to four million units in six months. "We have another consumer appliance plant coming up in Madurai that would enable us to produce seven million units per annum. Manufacturing for other DTH companies would be by Videocon Industries and not so much by BBCL, which would concentrate on building the D2H brand," said Khera. He added: "We have just gone pan-India since the last four months. Capacity utilisation for D2H is picking up from 0.12 million units last month to 0.17 million units this month. We expect to manufacture around 0.2 million units in the coming months due to the IPL, Commonwealth Games, FIFA Soccer World Cup and other high-wattage events," he said.

At present, there are around 20 million DTH subscribers in India, expected to go up to 40 million by the end of 2010. Analysts felt other DTH operators would not have a problem sourcing from Videocon, as getting into a deal for STB is not about sharing intellectual property. "Videocon, with its in-house production facilities, should be able to provide the STBs at a cheaper price than the Chinese manufacturers. Presently, most players source their STBs from China or Korea and if they get a cost advantage and quality products at home, they will consider the proposition," said Alok Shende, principal analyst, Ascentius, a Mumbai-based consultancy.

He said Videocon's D2H business was a move for backward integration in the consumer durable space. "The company wants to compete as well as collaborate with other players." Khera said Videocon would provide a cost advantage of 10-15 per cent. "Indian operators will not have to pay the five per cent import duty and there would also be reduction in logistics' costs. Presently, operators procure STBs at an average cost of $35 (Rs 1,600) and they are sold at around $55 (Rs 2,500) per piece."