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Ortel’s Q2 results take a hit due to intense competition, collection shortfall

MUMBAI: Multi system operator (MSO) Ortel Communication’s net loss for the fiscal second quarter ended 30 September almost doubled to Rs 5.7 crore compared to a net loss of Rs 2.9 crore in the quarter ended 30 June.

EBITDA fell 19.8% to Rs 9.2 crore from Rs 11.5 crore. EBITDA margin fell to 20.5% compared to 24.2%.

Revenue from operations fell 5.7% to Rs 44.1 crore from Rs 46.8 crore a quarter ago. Expenditure remained flat at Rs 35.6 crore compared to Rs 35.9 crore.

The company is facing severe competition in its core market Odisha, a shortfall in collections and repayment of debt among others. While the entry of a new player has muddied the water in Odisha the company’s receivables days further increased to 176 in Q2 due to a continuous shortfall in collections.

The shortfall in receivables was largely attributable to the Cable TV business, the receivables for which stood at Rs 66 crore, out of the total receivables of Rs 87 crore.

Ortel’s total cable TV customer jumped to 7.66 lakh compared to 7.47 lakh in the trailing quarter. Broadband subscribers fell to 65,262 from 70,273 a quarter ago.

The total subscriber base stood 8.31 lakh compared 8.17 lakh.

The cable TV subscriber base in Odisha dropped 2% to 5.1 lakh while in emerging markets (Chhattisgarh, Madhya Pradesh, Andhra Pradesh, Telangana and West Bengal) the base jumped 8.1% to 3.2 lakh.

The average revenue per user (ARPU) in both the segments saw a decline. Cable TV ARPU fell to Rs 133 from Rs 137 while broadband ARPU dropped to Rs 223 from Rs 267.

Ortel said that the ARPU declined due to severe competition in the marketplace led by the newer entrant which resorted to disruptive pricing.

Cable TV segment

Revenue from cable TV segment fell 4.3% to Rs 35.5 crore from Rs 37.1 crore amid a drop in subscription and carriage fee. Subscription fee was down 3.4% to Rs 27.8 crore while carriage fee dropped 13% to Rs 5.4 crore.

Programming cost declined 3.5% to Rs 11.1 crore from Rs 11.5 crore. Pay channel cost per customer was down at Rs 48.98 compared to Rs 51.28. Pay channel cost as a percentage of cable TV subscription remained unchanged at 40%.

EBITDA from the Odisha market fell 17.5% to Rs 10.9 crore while revenue declined 10.1% to Rs 31.9 crore. In the case of emerging markets, the EBITDA increased 118.8% to Rs 60 lakh while revenue grew 8.2% to Rs 11.6 crore.

Broadband segment

Broadband revenue fell 17.1% to Rs 5.1 crore as against Rs 6.1 crore in the trailing quarter. Subscription fee was down 18% to Rs 4.7 crore. Broadband bandwidth cost remained flat at Rs 2.5 crore.

The company said that the actions undertaken by the management with respect to product pricing and marketing will help improve the performance of Broadband business going forward.

Commenting on the performance, Ortel Communications president & CEO Bibhu Prasad Rath said, “Our performance during the quarter further weakened due to multiple challenges faced by us including severe competition in our core market, collections shortfalls, and repayment of debt as well as integration issues among others. The financial year 2018 has been a difficult year for us on all the fronts and we are actively working towards restoring the business performance.

“We have taken many firm steps to turnaround our performance over the last few months, and we expect operations to improve going forward. However, we will take one year to fully stabilize our business. In the near-term, our main effort is to improve cash collections, which will help us through this difficult phase of the Company. We remain committed to our B2C ‘last mile’ business model and believe it will help us through this tough operating environment.”