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Reducing pay channel costs, state-owned Arasu is profitable for 3rd year

MUMBAI: How can a state-owned multi-system operator (MSO) be profitable while keeping cable TV subscription rates low? Has it come at the cost of the pay TV broadcasters? Should the MSO not be given a licence to operate in digital addressable system (DAS) areas?

Controversies aside, Tamil Nadu government-owned MSO Arasu Cable TV Corporation has shown how it can be profitable for the third year in a row.

Arasu-coverIn a policy note, Minister for Information Technology M Manikandan said that the subscription rates of various pay channel broadcasters were further reduced through negotiations thereby making a saving of Rs 11.50 crore (Rs 115 million) per year.

In the fiscal ended 31 March 2016, Arasu reported a net profit to Rs 32.6 crore (Rs 326 million) on a revenue of Rs 217.02 crore (Rs 2.17 billion). In the year-ago period, net profit stood at Rs 18.6 (Rs 186 million) on a revenue of Rs 181.91 crore (Rs 1.82 billion).

Arasu’s subscriber base, which was 4.94 lakh on 2 September 2011, grew manifold to 70.52 lakh (7.05 million) connected through 26,246 local cable operators (LCOs).

The state’s dominant MSO provides 90–100 channels to the subscribers in the Chennai Metro Area at Rs 70 per month. To date Arasu has connected 3.40 lakh subscribers through 820 LCOs in the Chennai Metro Area.

Arasu, incorporated on 4 November 2007, was in the red till FY14. In its first year of operation, the MSO’s revenue stood at Rs 2.44 crore (Rs 24.4 million) during 2008–09 with a net loss of Rs 4.91 crore (Rs 49.1 million).

However, the MSO became profitable by increasing subscriber base, generating more revenue by allotting slots to private local channels through tendering and reducing pay channel cost.

Arasu was paying Rs 15.78 crore (Rs 157.8 million) per month towards broadcaster’s subscription fee amounting to Rs 189.36 crore (Rs 1.89 billion) a year.

The MSO adopted expenditure control and revenue augmentation measures including obtaining discounts to the tune of Rs 38.40 crore (Rs 384 million) from the pay channel broadcasters for 2013–14.

All these measures resulted in Arasu attaining a net profit of Rs 12.02 crore (Rs 120.2 million) during 2013–14.

After wiping out the accumulated loss of Rs 9.83 crore (Rs 98.3 million), Arasu had a surplus fund of Rs 2.18 crore (Rs 21.8 million) during 2013–14. Out of this, an amount of Rs 1.50 crore (Rs 15 million) was paid as dividend to the government.

Arasu was started with government’s share capital of Rs 25 crore (Rs 250 million), plus a term loan of Rs 33 crore (Rs 330 million) from the state government.

Arasu has established additional infrastructure utilising the headends of private MSOs in 27 districts on lease, apart from revamping its existing digital headends in four districts.

As on date, Arasu has under operation 83 headends including those utilised on lease from former MSOs. It has established connectivity to 26,246 LCOs from these 83 headends across the state.

Arasu’s DAS licence registrations for Chennai and the rest of Tamil Nadu is pending with the Ministry of Information & Broadcasting (MIB) since 2012. The corporation has even filed a petition in the Madras High Court against the MIB for not processing its registration.

Despite the setback, Arasu has taken steps to digitise cable TV services in the Chennai Metro Area. To this end, Arasu floated a tender for the supply, installation, testing and commissioning of digital cable TV headend with conditional access system (CAS), subscriber management system (SMS) and 10 lakh set-top boxes (STBs) on rate contract basis for one year on 25 September 2012.

Orders were placed and an initial lot of 50,000 STBs were procured. Out of this, 28,752 STBs have already been distributed to 383 LCOs.

Arasu has invested Rs 20.72 crore (Rs 207.2 million) to purchase STBs, CAS, SMS and other items required for setting up a digital control room in Chennai.

It had entered into a memorandum of understanding (MoU) with RailTel Corporation of India in order to provide broadband and internet services through the LCOs throughout Tamil Nadu.

As a pilot project, around 1,000 internet connections have been provided through 35 LCOs. The service quality is being closely monitored. Steps are being taken to popularise Arasu’s internet service among the LCOs in order to increase the number of connections.

Arasu was granted ‘Unified Licence – ISP Category B’ for service area Tamil Nadu by the Department of Telecommunications, Ministry of Communication & Information Technology.