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DEN plans to dilute stake in soccer biz; broadband to consume Rs 250 cr in FY16

MUMBAI: DEN Networks, which has aggressive plans for cable TV digitisation and broadband, is looking to dilute its stake in the loss-making soccer business.

“Investors have not liked us doing soccer. We are looking to reduce our stake in this line of business,” a senior DEN Networks executive said.

While the loss from Delhi Dynamos FC, DEN’s Delhi franchise for the Indian Super League (ISL), stood at Rs 46.05 crore (Rs 460.5 million) on a revenue of Rs 8.08 crore (Rs 80.8 million) in FY15, it is expected to drop marginally to Rs 35–40 crore (Rs 350–400 million) in the current fiscal.

DEN’s soccer business resides in its wholly owned subsidiary DEN Soccer Pvt Ltd.

For the broadband business, the multi-system operator (MSO) plans to invest Rs 200–250 crore (Rs 2–2.5 billion) this fiscal. “The capex for broadband is Rs 2,500 per home passed. This has come down to Rs 1,800 and is expected to further fall to Rs 1,600–1,800 per home passed,” the executive said.

While the company has started with Docsis 3.0, it will also have GPON in some markets. A small portion of the market will also be addressed through metro Ethernet.

DEN’s broadband ARPU stands at Rs 750, but this may get diluted a bit going ahead. The MSO may decide to price it more aggressively as it goes more mass. Now 40 per cent of its 23,000 broadband subscribers come from non-DEN homes.

“We were in the soft launch phase. We have been stepping up for the last two months. The plan is to have 3–4 million broadband subscribers over the next five years,” added the executive.

In cable TV digitisation, the capital expenditure will depend on the deadline for digital addressable system (DAS) in Phase III. If the 31 December 2015 deadline is not extended, it will require more investments as it has a sizeable presence in the Phase III cities.

“We do not have a definite capex in mind for cable TV digitisation as it is directly related to the Phase III deadline. But our current cash position is good to cover our investments in cable and broadband for 18–24 months,” the executive said.

The content cost has climbed mainly due to Star and Zee. In the fiscal ended 31 March 2015, content cost increased 25 per cent over the previous year to Rs 464.52 crore (Rs 4.6 billion).

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. Activation income was Rs 64 crore (640 million) as the deployment of set-top boxes (STBs) more than halved to one million in FY15. Subscription revenue, net of local cable operator (LCO), stood at Rs 459 crore (Rs 4.59 billion).

“The content cost has got structurally adjusted in DAS Phase I and II cities. Going forward, it will only be inflationary in nature. Our EBITDA in these cities is 20 per cent. The margin in Phase III and IV towns is under loss as we are still in investment mode,” the executive said.

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