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Hathway Cable & Datacom gears up to beat slow start in Q1

MUMBAI: Hathway Cable & Datacom has had a slow start in the first quarter but expects deployment of set-top boxes (STBs), net addition of broadband subscribers and capital expenditure consumption to speed up in the remaining quarters of the fiscal.

In broadband, Hathway has taken some tough decisions like increasing prices and weeding out low-end subscribers, ahead of Reliance Jio’s launch. The multi-system operator (MSO) is phasing out DOCSIS 2.0 in those cities where it has a smaller footprint. The strategy is to focus on the top six metro markets.

Revenue share from LCOs

Hathway has increased its average revenue share from local cable operators (LCOs) in Phase II cities of digital addressable system (DAS) to Rs 76 a month per subscriber in the fiscal first quarter, up from Rs 67 in the trailing quarter. In Phase I cities, net ARPU (average revenue per user) stayed flat at Rs 100.

The MSO’s fiscal-end target is to lift net ARPU from cable TV subscription to Rs 110-115 and Rs 100 in Phase I and II cities respectively. In Hyderabad, the MSO is looking at Rs 50 as the net ARPU in the exit quarter of the fiscal.

“We are gradually implementing pre-paid system at the operator and consumer level. We will also aggressively implement packages and upgrade subscribers to higher packs. All these measures will enable us to lift net ARPU in DAS markets,” a senior company executive said.

Hathway has started pre-paid billing system from 1 August. It is introduced in pockets and the target is to cover 50 per cent of its digital subscribers by the end of the financial year.

Introduces ‘Right to Use’ contracts with LCOs

Under the ‘Right to Use’ (RTU) contracts, Hathway manages the LCO’s last-mile network, including billing and backend infrastructure.

Hathway is servicing 13,000 subscribers through RTU contracts with LCOs. The MSO expects net ARPU to increase under this arrangement.

Broadband

Hathway has increased its broadband prices by 25 per cent for new subscribers and by 10 per cent for its existing customers. The MSO believes that it will not be impacted by the launch of Reliance Jio as its broadband offering is 30-40 per cent cheaper than the telcos.

Hathway is also voluntarily churning out DOCSIS 1 and DOCSIS 2 subscribers due to low ARPU and high cost of operations. This exercise is confined to those cities where it does not have a concentrated footprint. The MSO will continue with DOCSIS 2 in high-value markets like Mumbai.

“In the long run it is not viable to run parallel technologies. We want to phase out DOCSIS 2 and upgrade subscribers to DOCSIS 3.0. But we will continue with DOCSIS 2 in high-value markets where we have a presence. Our focus will be on top six metros,” the Hathway executive said.

Due to the churn, Hathway’s net broadband subscriber addition in the fiscal first quarter stood at just 5,000 while gross adds were at 50,000. In the quarter, 30,000 DOCSIS 3.0 subscribers were added, compared to 27,000 in the preceding quarter, taking the total base to 170,000.

Hathway’s DOCSIS 3.0 ARPU has expanded from Rs 750 to Rs 850 per month. Overall, broadband ARPU in the first quarter was at Rs 577 per month, up from Rs 530 in the trailing quarter. As 8 per cent licence fee has to be paid starting from the first quarter, broadband margin was impacted.

HD subscribers

Hathway has added 10,000 high-definition (HD) subscribers in Q1, its best ever in a quarter. HD ARPU is at Rs 150.

Capex

Hathway’s capex for broadband in FY16 is expected to be Rs 170 crore (Rs 1.7 billion) while cable TV will consume Rs 125 crore (Rs 1.25 billion) at a standalone level.