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‘In the cable TV land, I am known as a good warrior’
Fastway Transmissions founder–managing director Gurdeep Singh calls himself a ‘good warrior’. In a short span of six years since his start, he has ruled Punjab and spread the tentacles of his cable TV empire to neighbouring Chandigarh, Haryana, Himachal Pradesh and pockets of Rajasthan.
Critics say Singh owes his success in no small measure to the high and mighty Sukhbir Singh Badal, the son of Punjab chief minister Parkash Singh Badal. Ruling out such allegations, he explains that Fastway Transmissions’ growth has been due to its investments in expensive but better technology, a wide swathe of local cable channels and strong focus on quality of service.
Originally starting as a joint venture with Digicable, Singh has by now upped his stake to 67 per cent. Pouring in Rs 700 crore (Rs 7 billion), he has deployed 2.5 million set-top boxes (STBs) and is planning to roll out broadband.
For funding his next leg of expansion, Singh is looking to raise capital through an initial public offering (IPO).
In an interview with TelevisionPost.com’s Sibabrata Das, Singh talks about Fastway’s growth plans, potential turf battle with Siti Cable in Haryana, the importance of voluntary digitisation and fault lines in TRAI’s recommendations on curbing cable monopolies and capping local cable channels run by distribution platform operators (DPOs).
Q. How have you been able to dominate the Punjab cable TV market?
We have invested heavily in infrastructure, got the best line of vendors and offer quality service. We are, perhaps, the only multi-system operator [MSO] in the country to offer 94 local cable channels. It is for all these reasons that we have been able to compete with DTH and lift our ARPU [average revenue per user] in Punjab to Rs 260 a month. That is the way forward so that the MSO, the local cable operators [LCOs] and the broadcasters can all make money.
Q. Some say that you benefited because of your close relationship with Sukhbir Singh Badal?
Relations don’t come in handy everywhere. I do not know anyone in Himachal Pradesh, but we are operating and doing well there as well. We are also present in Haryana, Chandigarh and parts of Rajasthan.
The key to our success is that we invest in expensive but better technology. We use Cisco STBs. We experimented with cheaper STBs initially, but 10–12 per cent of those had to be returned due to faults. And customers also were not happy. We have also connected the whole network with 10,000 km of underground fibre.
|‘Haryana is a big market and there will be enough share for both Siti Cable and us to do good business here. But if someone decides to go out of the way, then there will be no truce. In the cable TV land, I am known as a good warrior’|
Q. Why, then, was there a firing incident in Amritsar following a meeting called by the MSO to discuss billing and revenue share issues with the LCOs?
This happened close on the heels of a meeting organised by HITS [headend-in-the-sky] service provider JAINHITS. Some wanted to benefit from JAINHITS, but the LCOs did not agree with them. The incident that followed was unfortunate. Our LCOs have no problem with us and we have started DAS [digital addressable system] billing.
Q. Subhash Chandra was in Hisar last month and some LCOs affiliated to Siti Cable said that the chairman had asked them to aggressively expand in Haryana. Fastway is also having aggressive plans. Will we see warfare or a truce between the two MSOs?
Haryana is a big market and there will be enough share for each of us to do good business here. But if someone decides to go out of the way, then there will be no truce. In the cable TV land, I am known as a good warrior.
Q. Will you swap STBs to expand aggressively in Haryana?
No, we don’t swap boxes. If we had to do that, we would have done it in Delhi where carriage income is also good. It is not a good business model. We are giving Cisco STBs to the operators for around Rs 999, while the cost is almost double of that. So, instead of offering free boxes, we make them available at a subsidy.
In Haryana, we are present in 24 cities. Our plan is to create a footprint across Punjab, Haryana, Chandigarh, Himachal Pradesh and parts of Rajasthan.
Q. How many STBs have you deployed and what has been the total investment made in the cable TV venture?
We have invested Rs 700 crore [Rs 7 billion]. We have deployed 2.5 million STBs, out of which in the Phase II cities of Amritsar, Ludhiana and Chandigarh, we have placed 600,000 boxes. We also have presence in the Phase III and IV towns where the DAS deadlines have been extended to 31 December 2015 and 31 December 2016 respectively. We have done voluntary digitisation and the remaining boxes have been seeded in these towns.
Q. Digicable originally held 49 per cent stake in Fastway Transmission. Has the cash-strapped Digicable kept pace with these investments or has its stake in the JV got diluted?
When Fastway Transmissions started in 2008 as a JV, Digicable held 49 per cent stake and I owned the balance 51 per cent in the analogue cable business. In the digital side of the business, I was a distributor. But after a year, Digicable had some financial problems. So we took share in digital as well.
As we went on investing in the STBs and digital infrastructure, Digicable could not pump in capital into the JV in proportion to its stake. So, its stake has got partially diluted and Digicable currently holds 33 per cent in the company. In the current shareholding structure, we hold 67 per cent stake in both analogue and digital cable.
Q. Is there a big plan for broadband or will it continue to be a missing piece?
We are planning to invest Rs 400–500 crore [Rs 4–5 billion]. We have laid the fibre and are ready with the broadband infrastructure in Punjab. We wanted to do DOCSIS earlier, but have now decided to do only a limited portion of that. For the rest, we are planning GPON. We are planning to roll out broadband by March 2015.
Q. Is funding ready or will you go for an IPO?
Yes, we have an IPO plan. We intend to file a draft with the market regulator SEBI next year. This will be mainly for funding the broadband business. For cable TV digitisation, we have access to Cisco’s vendor financing.
Q. Since Fastway also runs 94 local channels, will they form a part of the MSO company?
The television channels will remain very much a part of the company which we propose to list. Many of these are ad-free channels and show live content from the local gurudwaras in Amritsar, Ludhiana, Patiala, etc. Some of them are also regional channels showcasing Punjabi songs, movies, Pakistani songs, shows, old movies and Hindi songs.
Although that advantage of gurudwaras is not there in Haryana, we will create local channels for them. Local sports tournaments, temples, school functions and spiritual programmes will be aired live through these channels.
Since we have a plethora of local channels, we are not in favour of the TRAI’s recommendation to cap platform services channels offered by a DPO at 15 in DAS areas and at 5 in non-DAS areas.
Q. What will be the size of the IPO?
The IPO could be in the range of Rs 400 crore [Rs 4 billion]. But it is too early to give an indicative size. We have also not decided on how much we will dilute as there is still time for that.
Q. Will your stake drop below 51 per cent?
It will not fall below 51 per cent. My guess is that I will offload 16 per cent and Digicable will also cut down its stake. All this, though, will depend on the valuations that we get.
Q. Will Fastway look at private equity investors ahead of the IPO?
No, we are not going to have a PE investor. Bank debt is better than that. The current debt in the company is in the range of Rs 400 crore [Rs 4 billion]. For equity financing, we will do an IPO.
In FY14, our EBITDA stood at Rs 96 crore [Rs 960 million] while revenue was Rs 350 crore [Rs 3.5 billion]. We got carriage revenue of Rs 80–85 crore [Rs 800-850 million].
Q. Under the DAS economy, is the MSO’s financial health any better?
The whole burden of digitisation is on the MSO, be it in investing in STBs or billing or call centres. Financially also the broadcaster has taken strong subscription revenue growth in the last two years.
The revenue model of the MSO is not healthy. Carriage is the only model, which is depleting. Even in our case, carriage is flattening.
The content cost in the DAS cities has jumped sharply. Earlier, we were giving Rs 35 CPS [cost-per-subscriber] to MediaPro [JV between Star DEN and Zee-Turner]. Now Star wants that amount and has gone RIO [reference interconnect offer]. This means that we won’t have any carriage income from Star.
We are getting Rs 125 per STB from LCOs in DAS areas. If you remove tax and distribution cost, what will remain is Rs 95 per STB. The content cost is in the range of Rs 55–60 per STB. On top of that, we have operational expenses. There is also the investment made in procuring STBs. After all this, there will be nothing left for us.
Q. So post DAS, are you actually slipping from a profitable to a loss-making company? Why are you expanding then?
We will have to increase collection from the LCOs and turn it into a growth model. There is no business which is loss making; it depends on how you do it.
If there is always loss, no business will work. It works because some people are earning. The non-efficient keep losing and the efficient keep earning. We will remain the efficient ones.
Q. Are you looking at acquiring last-mile connections to ramp up your primary points?
We have over 150,000 direct points. We are keen to acquire last-mile connections whenever cable operators decide to sell or wind up their businesses.
Q. How has the extension of the sunset date for analogue cable in Phase III and IV towns by the Narendra Modi-led BJP government impacted Fastway? Do you think voluntary digitisation is a better strategy?
The only way to counter DTH effectively is to offer quality digital cable TV services. Even if the government has extended the deadline, voluntary digitisation will help the MSOs to stabilise their network in the 12 to 18 months, and recover the price of the STBs on time. If they wait till the last moment, there is the danger of box swapping. We propose to completely digitise our network ahead of the deadline mandated by the government.
Q. TRAI has spelt out recommendations to curb cable monopolies, one of which is that an MSO cannot hold more than 50 per cent market share in a state. Will Fastway have to restructure if the government accepts TRAI’s recommendations?
We will see what to do once that gets implemented. TRAI has allowed single-entity MSOs to grow organically beyond 50 per cent share in a state. If need be, we will restructure our business.