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Ortel slips into loss in Q3 as rev dips and costs go up

MUMBAI: Multi-system operator (MSO) Ortel Communications has posted a net loss of Rs 2.8 crore for the quarter ended 31 December compared to a net profit of Rs 2.5 crore in the quarter ended 30 September.

The net loss is due to a 4.8% dip in revenue, which fell to Rs 51.2 crore, and an increase of 7.7% in expenditure to Rs 40 crore.

The MSO’s revenue from cable TV segment dropped 4.8% to Rs 40 crore compared to Rs 42 crore in the trailing quarter due to a 40.8% drop in connection fees and a 7.4% fall in carriage fees.

Connection fees during the quarter dropped to Rs 2.5 crore compared to Rs 4.2 crore, while carriage fee fell to Rs 7.5 crore from Rs 8.1 crore.

Ortel Q3 Fy17 Segment-wise Revenue break-up

The fall in carriage revenue can be attributed to the RIO deals signed by Ortel with Star India and IndiaCast. Cable subscription saw a modest 1% growth to Rs 30 crore.

On the broadband side, total revenue fell 12.6% to Rs 8.7 crore from Rs 10 crore. Connection almost halved to Rs 20 lakh from Rs 50 lakh. Broadband subscription income fell 10.6% to Rs 8.5 crore from Rs 9.5 crore.

Income from infrastructure leasing was up 70.9% to Rs 1.7 crore from Rs 1 crore.

In terms of market break-up, the core Odisha market saw an 8.9% fall in revenue to Rs 37.9 crore as opposed to Rs 41.6 crore. EBIDTA from Odisha market came down 21.9% to Rs 13.6 crore compared to Rs 17.4 crore.

It lost 3,903 closing subscribers, thus ending the quarter at 539,229 subscribers. Closing homes passed rose by 946 homes to 837,988. Subscribers in the pipeline shrank to 5,694 from 11,121 in the trailing quarter.

Ortel Q3 fy17 Core Market (Odisha)

Ortel’s revenue in non-Odisha market grew 9.2% to Rs 12.8 crore as against Rs 11.7 crore even as the company’s EBITDA fell 31% to Rs 60 lakh from Rs 80 lakh. Closing homes passed increased by 15,983 to 515,368. Closing subscribers increased by 10,480 to 272,237 while subscribers in the pipeline decreased by 18,922 to 30,994.

Ortel Q3 fy17 Emerging Markets (Chhattisgarh, Madhya Pradesh, Andhra Pradesh, Telengana & West Bengal)

Ortel’s total cable TV subscribers declined to 738,963 from 725,707. Total primary broadband subscribers declined to 72,503 from 79,182.

The company’s ARPU from the cable TV segment fell to Rs 150 from Rs 153 while broadband ARPU fell to Rs 394 from Rs 406. Its pay channel cost per subscriber increased to Rs 41.83 from Rs 40.62.

Giving an update on operational challenges during the quarter, Ortel said that collections in newer markets have gone relatively slow due to inadequate infrastructure on the ground for collection.

It also said that collections in older subscriber base have suffered due to the analogue-to-digital transition and demonetisation.

Since Ortel follows an aggressive stance on providing for bad debts, the company has factored the shortfall in collection into P&L statement to a large extent.

It expects to have adequate infrastructure for collections in place for new markets shortly. It also said that full digitisation base will assist in controlling debtor days and bad debts.

It said that ARPU has remained flat at Rs 150 largely because newer subscriber acquisitions have come at a much lower ARPU. In addition, as the company integrates new subscribers from local cable operators, it has to initially absorb tax. It further stated that growth in cable TV subscribers through the organic route comes typically at a lower ARPU.

Ortel believes that, after the initial consolidation phase, it should be able to pass on tax and appropriate ARPU increases in the new sub base. It also expects penetration to improve in the older markets through the organic route.

The company’s cable TV subscriber additions have been impacted by the delay in closure of debts. Demonetisation and increased competitive situation impacted broadband subscriber growth.

Expecting to tie up remaining debts shortly, the company said it is committed to achieving the stated target of 1 million subscribers. After one quarter of negative growth, broadband net growth has turned positive starting Jan 2017 and is expected to grow further going forward.

Bibhu-Prasad-Rath-galleryCommenting on the performance, Ortel Communications president & CEO Bibhu Prasad Rath said, “Our performance during the quarter was impacted due to a combination of factors, which weakened some of our key operating parameters. In spite of this, we have demonstrated a healthy growth in revenues from both cable TV and broadband business on a Y-o-Y basis both for Q3 and 9M FY17. I am also happy to inform that our business outside Odisha which turned EBIDTA positive last quarter has remained so during this quarter.

“Overall, we have demonstrated that a strong B2C-focused last-mile business model in our core market can be profitable, and remain confident of replicating the same across newer markets. We continue to believe that this is a sustainable model as we can capture the entire revenue stream across the value chain.”