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DEN Networks’ carriage rev flattens and content cost rises in FY15

MUMBAI: For DEN Networks, the fiscal ended 31 March 2015 has seen two disturbing trends but a senior executive said that the fourth-quarter was an aberration and the digital cable TV business in Phase I and II cities was stabilising.

Carriage revenue has almost flattened in FY15 over the prior-year period while there is a 25 per cent rise in content cost.  Activation revenue has dropped as the deployment of set-top boxes (STBs) has more than halved. Despite a 25 per cent jump in subscription revenue over the earlier year, DEN Netorks’ EBITDA from the cable TV business has shrunk in FY15.

Den subs baseDen Networks, which has diversified into football and home shopping channel, has seeded close to 1 million STBs in FY15, taking its digital subscriber base to 7 million, out of its 13-million universe. The deployment of STBs is expected to speed up this fiscal as the government has set 31 December 2015 as the deadline for digital addressable system (DAS) in Phase III towns.

Flattening carriage income

DEN Networks’ placement (carriage) revenue grew marginally by 1.9 per cent to Rs 474 crore (Rs 4.74 billion) in FY15, from Rs 465.3 crore (Rs 4.65 billion) a year ago.

Subscription revenue grew 25 per cent to Rs 508 crore (Rs 5.08 billion) compared to Rs 406.9 crore (Rs 4.07 billion) in the earlier year. Collection from local cable operators (LCOs) in the DAS Phase I and II cities improved.

In FY15, DEN’s total revenue from cable business stood at Rs 1,093 crore (Rs 10.93 billion) compared to Rs 1,055 crore (Rs 10.55 billion) a year ago.

Content cost

In the cable TV business, DEN Networks’ content cost (payout to channels) increased to Rs 464.52 crore (Rs 4.64 billion), from Rs 371.73 crore (3.72 billion) a year ago.

Excluding activation and LCO share, the company’s cable TV business revenue grew 11.5 per cent to Rs 966 crore (Rs 9.96 billion).

EBITDA

Cable business EBITDA dropped to Rs 187 crore (Rs 1.87 billion), from Rs 301 crore (Rs 3.01 billion) in the prior fiscal. The company said that the impact was caused by an increase in content costs and investments in Phase III and IV markets.

DEN mkt wise subsEBITDA (excluding activation) stood at Rs 122 crore (Rs 1.22 billion) during the fiscal, compared to Rs 147 crore (Rs 1.47 billion) in the previous fiscal.

The company said that it has 5.1 million digital subscribers in Phase I and II markets, out of which it is billing approximately 80 per cent of the subscribers.

Consolidated business

On a consolidated basis, DEN suffered a net loss of Rs 144.01 crore (Rs 1.44 billion) compared to a net profit of Rs 38.40 crore (Rs 384 million) in the year-ago period. Operational revenue for the fiscal stood at Rs 1,129.64 crore (Rs 11.3 billion), compared to Rs 1,116.69 crore (Rs 11.17 billion) in the year-ago period.

Expenses stood at Rs 1223.18 crore (Rs 12.23 billion), up from Rs 961.92 crore (Rs 9.62 billion) in the year-ago period.

DEN FY15 pnLConsolidated EBITDA stood at Rs 92 crore (Rs 920 million) from Rs 302 crore (Rs 3.2 billion) in the earlier year.

DEN Networks CEO Pradeep Parameswaran said, “We are laying the foundation of building a powerful consumer franchise in broadband, cable television, and television shopping. Significant investments are being made to bring disruptive consumer offerings to the market. We are augmenting our historical strength in cable operations with high-quality talent in all functions. Besides focus on internal changes, I am also hopeful of a stronger collaboration with LCOs and other industry partners to take steps for successful execution of digitisation process thus supporting the government push towards digital India. Our excitement in the scale of opportunities and our ability to capture it continues to remain strong.

“We have seen positive results on subscription revenues and collections in Q4 of the current year. The profitability has been impacted because of the new business initiatives of the company including broadband, TV shop and football as we build Den Networks for the future.”

DEN Boomband

DEN’s ARPU from broadband service in FY15 was at Rs 759.

DEN boombandThe high-speed broadband business of DEN Networks, launched earlier during FY15, now has a home pass of 329,000 homes. The company believes that the benefits of convergence out of the network rollout will come in the following quarters. It has a current subscriber base of 23,000 and 40 per cent of the new broadband subscribers come from non-DEN homes, the company said.

DEN’s revenue from broadband business during the fiscal was at Rs 8.10 crore (Rs 81 million) compared to Rs 3.54 crore (Rs 35.4 million) in the prior year.

Segment loss from broadband business stood at Rs 47.06 crore (Rs 470.6 million), up from a loss of Rs 1.82 crore (Rs 18.2 million) in the earlier year.

DEN segmentSoccer

Revenue from Delhi Dynamos FC, the Delhi franchise for the Indian Super League, stood at Rs 8.08 crore (Rs 80.8 million), while loss registered at Rs 46.05 crore (Rs 460.5 million).

DEBT

As of 31 March, the company had cash and equivalents of Rs 934 crore (Rs 9.34 billion), while net debt was at Rs 62 crore (Rs 620 million).

DEN FY15

DEN provides cable TV services to approx. 13 million subscribers in over 200 cities across 13 key states across India including Delhi, Uttar Pradesh, Karnataka, Maharashtra, Gujarat, Rajasthan, Haryana, Kerala, West Bengal, Jharkhand, Bihar, Uttrakhand and Madhya Pradesh.

FY15 Highlights

Q1 FY15

Launch of broadband and soccer impacted DEN’s EBITDA by Rs 8.9 crore (Rs 89 million).

DEN soft-launched DEN Boomband offering speeds up to 100 Mbps on DOCSIS 3.0 technology. It commenced the network infrastructure deployment with complete ownership of last-mile connectivity, at 15 locations in Delhi NCR and Kanpur.

DEN got on board CISCO for technology solutions, WIPRO for subscriber management system, Dentsu Creative Impact for brand creation and communication, and the Global Strategy Consulting firm for complete project management for the speedy roll out of broadband services.

The company also launched Delhi Dynamos FC, its Delhi team of the Indian Super League (ISL) through its wholly-owned subsidiary, DEN Soccer Pvt Ltd.

Q2 FY15

The company signed an MoU to enter into a 50:50 JV with Snapdeal.com’s parent company Jasper Infotech.

The JV launched a TV channel, DEN Snapdeal TV, based on a marketplace model for facilitating the sale of branded and unbranded merchandise and services, including vouchers offered by third-party sellers.

The company clocked annualised gross merchandise value (GMV) in excess of Rs 80 crore (Rs 800 million) based on the annualised daily run rate.

DEN Boomband started across 20 locations in Delhi NCR. ARPU was in excess of Rs 700 per month. The service achieved a home pass in excess of 200,000 subscribers by leveraging on the cable business infrastructure and capabilities of outsourced managed service partners.

In September, DEN CEO SN Sharma quit the company, ending his 7-year stint. Sharma later joined Mukesh Ambani-owned Reliance Jio.

Q3 FY15

DEN Snapdeal TV reached 19 million homes and clocked GMV of over Rs 100 crore (Rs 1 billion) with “double-digit contribution margins”.

DEN’s net loss from the venture stood at Rs 1.8 crore (Rs 18 million) on a revenue of Rs 0.6 crore (Rs 6 million). Expense was at Rs 2.4 crore (Rs 24 million).

DEN said that revenue from DEN Soccer was lower than anticipated as sponsors chose to wait and watch the extent of ISL’s popularity before committing larger ad spends. Net loss from the business was at Rs 36.1 crore (Rs 361 million) on a revenue of Rs 8.1 crore (Rs 81 million). Expenses stood at Rs 43.3 crore (Rs 433 million), resulting in an operating loss of Rs 35.2 crore (Rs 352 million).

DEN Boomband achieved a Home Pass in excess of 250,000 subscribers and got approximately 17,500 subscribers at weighted ARPU of Rs 750 per month.

Net loss from the broadband business during the quarter was at Rs 13 crore (Rs 130 million) on a revenue of Rs 2.2 crore (Rs 22 million). Expenses were at Rs 13.6 crore (Rs 136 million), while operating loss was at Rs 11.4 crore (Rs 114 million).

In January 2015, Pradeep Parameswaran from McKinsey and Co took charge as CEO of DEN Networks.