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‘We have decided to slow down till the digital market matures’
There can be no one-shot boost for the multi-system operators (MSOs). Digitisation has surely revitalised them, making them pump in massive investments and offering a profitable business model. But the pro tem pangs remain as content costs rise, carriage revenue falls and local cable operators (LCOs) refuse to part with all that they collect from subscribers.
IndusInd Media & Communications Ltd (IMCL) managing director Ravi Mansukhani talks candidly about the financial stress that MSOs have to live with till a foolproof digital system is put in place in the 41 cities (Chennai excluded) covered under Phase I and II.
Mansukhani admits that IMCL, which operates its cable TV business under the InCable (analogue) and InDigital (digital) brands, lags behind some of the other MSOs in the seeding of set-top boxes (STBs). In a reworked strategy, the company has gone slow but will bounce back into aggression once the digital environment matures and the systems and processes have stabilised.
In an interview with TelevisionPost.com’s Sibabrata Das, Mansukhani elaborates on IMCL’s plans to raise Rs. 5 billion and how the MSO can still set sights on scale, broadband, triple play and value-added services.
Did IMCL rework its strategy after planning aggressive customer growth in the first phase of digitisation?
Like all MSOs, we were initially looking at seeding the maximum number of STBs in Phase I. In fact, our target was over two million.
But the rules and tariff order (set by the Telecom Regulatory Authority of India) were not conducive to doing profitable business. Since there were no fixed MRPs (maximum retail price) of the channels, or revenue share model as in CAS (conditional access system), we ended up negotiating with both the broadcasters and the LCOs. Since we were the ones that invested all the money and were desperate to complete the digitisation process, we had to compromise the most. As the pay-ins could not match the pay-outs, we decided to slow down till we could get our breath back.
How much IMCL has invested in DAS and how many boxes have been seeded?
We have invested over Rs. 6 billion in digital addressable system (DAS). We have deployed close to three million STBs, out of which the metros account for nearly 1.3 million.
Yes, we may have fallen below the others in deploying STBs. Maybe, we are conservative and are conserving our funds till we see some maturity in the market. Once we feel that the digital environment has matured and our systems and processes have stabilised, we will get aggressive
Has IMCL slipped down the pecking order, below Hathway Cable & Datacom, DEN Networks and Siti Cable?
Yes, we may have fallen below the others in deploying STBs. Maybe, we are conservative and are conserving our funds till we see some maturity in the market.
Is IMCL in talks with Investors to raise Rs. 5 billion?
We need funding. We require capital to expand, fund value-added services (VAS) and broadband. We plan to offer server-based channels that will maintain our differentiation by offering a bouquet of local channels carrying content and events of those regions.
If IMCL had raised capital, would it have been more aggressive?
With hindsight, no. We are seeing how tough it is to seamlessly move from a B2B to a B2C environment. The current rules and tariffs (TRAI order) are not congenial to independent MSOs. The digital platform is still undergoing change. The regulator (TRAI) is trying to provide a level playing field, as seen by the number of consultation papers that have been issued since the implementation of the digital addressable system (DAS). Once we feel that the digital environment has matured and our systems and processes have stabilised, we will get aggressive.
How has digitisation affected MSOs financially?
Independent MSOs will be under financial stress till the entire digitisation process is complete in the 41 cities (Chennai excluded) covered under Phase I and II. They have invested a huge amount of money in STBs and digital infrastructure. Their content cost has jumped, the interest on borrowings is high, there is no infrastructure status as yet, and their carriage revenues have dropped. They will continue to be in a mess till they start collecting their dues from the ground.
When do you expect Mumbai and Delhi to settle on packages and actual subscription collection from their LCOs?
Even in the three metros of Delhi, Mumbai and Kolkata, digitisation is far from totally complete. Consumers are getting digital service but are not yet in a position to exercise absolute choice. This facility is only now being offered in Delhi by the MSOs, where various packages and a la carte channels are available to the cable subscriber. Mumbai should follow in October and Kolkata in November.
MSOs will be in pain till a foolproof digital system is in place. They have invested a huge amount of money in STBs and digital infrastructure. Their content cost has jumped, the interest on borrowings is high, there is no infrastructure status as yet, and their carriage revenues have dropped. They will continue to be in a mess till they start collecting their dues from the ground
So, MSOs will be in financial pain till everything is in place?
Yes, MSOs will be in pain till a foolproof digitisation system is in place. What we have done so far is encrypt the channels, install STBs in consumer homes and collect CAFs (customer application forms). We still have to get packaging and retail billing in place in all the cities. The ground collections will come in due course, but our payouts are immediate as otherwise we get switched off, which is evident by the number of notices you see in the papers or on TV screens serviced by the independent MSOs.
When do you expect the entire digital system to fall in place?
Probably in the next few months. Once Mumbai and Delhi have the processes and systems streamlined, then it is only a question of scaling up. Phase II should be less painful. After that, it is back to business, with digital cable giving DTH (direct-to-home) a run for their money.
What is IMCL’s immediate plan?
IMCL’s immediate task is to expand its digital subscriber base to five million, once packaging and billing have stabilised for the cable Industry. We have an inventory of over half a million STBs and are hoping that domestic manufacturers have got their act together so that we need not import more boxes. We have requested TRAI to recommend incentives for this industry to make them competitive and cheaper than the Imports.
Is IMCL using Indian STBs?
We were among the first to order STBs from Indian manufacturers. I cannot comment on how Indian the products were, but they conformed to the standards. In fact, Phase 3 and 4 will require over 70 million STBs. At an average of $18 a STB, that’s a lot of dollars flowing out of the country next year if we cannot supply domestically. The government has to incentivise the local manufacturer, not only for the rupee but to make sure that digitisation does not suffer due to the high cost of STBs.
What is IMCL’s growth plan?
Any national MSO will be looking at a minimum subscriber base of 10 million. Having said that, we are not in a hurry to reach there. First, we need to first consolidate our base in Phase I and II. We want our systems and processes to stabilise and work effectively. We are focusing on our services and trying to ensure a profitable business proposition on a per-subscriber basis. If we can service Phase I and II successfully and profitably, i.e. keep the subscriber happy and making money, we can then look forward to growing the business exponentially. There is no point in expanding now and spreading ourselves thin, thereby compromising on servicing our existing subscribers.
We have also taken on board senior executives from the DTH and telecom space to help us with customer interfaces and pre-paid billing.
When will IMCL start investing seriously in broadband?
IMCL does not see broadband solely as a tool to add Internet subscribers but as a platform for delivery of multiple converged services to our cable subscribers.
As a cable company, we have the coaxial in the homes. However they being “one way”, we felt it is prudent to build a high bandwidth two-way broadband infrastructure in today’s digital world. We need to compete with the telcos in the broadband space and not with the local Internet service providers.
IMCL has moved from the Docsis space, and to upgrade broadband enablement of our existing one way HFC plant, we have deployed a mix of three competing technologies: MEN at the core, GPON at the aggregation layer and EOC at the access layer.
We have just completed our test runs (1100 subscribers) in four different parts of Mumbai city. We are planning to commercially launch our new broadband services in Mumbai and Delhi as soon as Phase I of digitisation has stabilised and funding is in place.
The acceptance and conversion was very high among the population that tried our services. We have offered bandwidth in the range of 6–15 mbps and our ARPUs have moved up from under Rs. 200 to the excess of Rs. 500. At present, we have a small subscriber base of 30,000 and are looking at exponentially increasing this next year.
IMCL was also experimenting with prepaid services for cable. How has that panned out ?
Prepaid services were launched sometime back and it is a first for the cable industry in India. It helps in creating transparency and real-time settlement with partner and customer besides providing empowerment and ease of service for the customer. As a pilot we are offering this service only to our direct point customers. At present, approx 5,000 customers are using this service in Mumbai. We have trained and developed front-end manpower to understand the new process. Based on the pilot, various improvements in the system and process are being made on a continuous basis.
We are considering testing multiple plan options for our subscribers like IVR, SMS and online. We will initially offer this service to all our direct point customers in Mumbai, before extending this across the city. Once we are satisfied with our systems, we will scale up to cover other cities.