DEN’s net capex for FY19 will be Rs 50 cr
MUMBAI: Multi system operator (MSO) DEN Networks plans to invest Rs 50 crore in FY19 on broadband and cable businesses on net capex basis that is excluding collections against seeding of set top boxes (STBs). In Q1 FY19, the company had deployed Rs 19 crore capex.
“So on a net capex basis (that is excluding collections against seeding of boxes) I do not think we will be doing more than Rs. 50 Crore. The capex for the quarter was Rs 19 Crore,” DEN Networks CFO Himanshu Jindal told analysts during the earnings conference call.
DEN Networks CEO said that the capex will be deployed largely on broadband and a little bit on the cable also. DEN has an ambitious plan of rolling out broadband in 100 cities.
The company is deploying Rs 30 crore on the broadband roll-out while in year two of the roll-out there will be very little capex. The company is following a low capex model for the broadband roll-out.
“There would not be any extra capex needed unless we utilise more than expected rush of this subscriber base. In that case, we will make some minor changes here and there in the network to strengthen the further delivery of higher requirements. If all goes well if we have started opening another 100 cities, 200 cities equivalent amount of capex would be needed extra over and above what I have just now outlined,” Sharma said.
Talking about the broadband plans, Sharma said that the company’s broadband subscriber base will see a gradual build-up over the next two financial years. The company hopes to reach 40000 to 50000 subscribers by FY19 in the 100 cities and 70000 subscribers by Q1 FY20.
“When it comes to year two, when the buildup has happened when all these towns have been enabled when closed to a subscriber base of roughly 5 million subscriber base of set-top-boxes has been enabled at that time you will see the penetration level picking up. We see the ramp up happening at year two and year three,” Sharma said.
He also noted that the penetration level today is 6% in the wireline broadband segment. Even for the top broadband players, the penetration level is not more than 17% to 18%. “So when a town is opened the LCO becomes a partner and they start approaching the subscriber, subscriber shows the interest and he is wired off. This whole is quite a lengthy process it takes time for a subscriber to get registered with his requirement and accordingly the LCO extends the wire to that fellow so it is a gradual buildup,” he stated.
DEN hopes to 10% penetration level of towns where it is rolling out the broadband service.
He also said that the local cable operators (LCOs) are very keen on broadband which is helping the whole process. “The awareness has already come in their life by using wireless devices. Now the beauty and utility of wireline devices are now been seen and felt and experienced by the subscriber that is going to spread very fast in year two. So the numbers of year one are no indication for year two. Himanshu also wants to add something,” he said.
DEN has rolled out high-speed broadband services in 28 towns which cater to roughly 1 million STB universe. Having enabled broadband for 1 million STB subscriber base, the onus now is on the LCO to register the demand from the subscriber once the demand comes.
“He is supposed to connect them and will start providing the services based on the guidelines that we have given to him and over a period of time, the numbers are likely to build up on this,” Sharma added.
The company has also signed up the agreement with LCOs in 48 more cities and for rest of the cities, the discussions are already in place.