Hathway slips into loss in Q1 due to strategic realignment of broadband portfolio

MUMBAI: Broadband and cable TV service provider Hathway Cable and Datacom has posted a standalone net loss of Rs 2.6 crore for the quarter ended 30 June as against a net profit of Rs 13.5 crore in the preceding quarter ended 31 March.

Operating EBITDA from the standalone broadband business was down 14% at Rs 55.3 crore compared to Rs 63.9 crore in the sequential quarter. EBITDA margin dropped 100 Bps to 43% from 44%.

Broadband subscription revenue was Rs 129.8 crore down 11% from Rs 145.7 crore in the trailing quarter. Expenditure was down 9% at Rs 74.5 crore from Rs 81.8 crore.

The company lost 30,000 subscribers due to a one-time strategic realignment of consumer portfolio to focus only on high-speed high consumption segment.

The company also forced churn 57,000 low-speed low data consumption consumers to concentrate on high data consuming users. The company said that the average data consumption of these consumers was 12 GB/month and these consumers have a tendency to switch to mobility due to low usage. Carrying them on the network would result in major inefficiency in network capex, it added.

The number of active but non paying consumers increased by 27,000 due to seasonality. These consumers, the company said, are in 30 days bucket before they get churned. In July, a majority of these consumers are coming back on the network.

The average revenue per user (ARPU) dropped to Rs 690 from Rs 710 in the preceding quarter due to a realignment of product portfolio wherein low price plans also have higher GBs.

The 43% EBITDA margins maintained through opex optimisation. There was o effect of ARPU drop on EBITDA margins

In the last 12 months, 0-20 GB consumers have gone down from 23% to 6% of the customer base. This is both due to increase in data consumption as well as loss of this low usage segment to low price plans of mobility. On the other hand, >80 GB consumers have increased from 24% to 54% of the customer base.

This realigned customer portfolio is extremely healthy for long-term profitability, the company stated.

Average GB/ consumer/month has increased to 105 GB in the month of June which is a strong indicator of demand side potential of high-speed wireline broadband.

The company added 0.3 million Home Passes during the quarter taking the total Home pass to 5.5 million through a constant focus on Network expansion. For the remaining nine months of FY19, the company has no further home pass expansion and the focus will be on the monetisation of existing home pass.

The company upgraded its tech infrastructure which enabled 50% increase in speed and 200% increase in data capacity. Minimum data limits across the country increased to 200 GB / consumer/month. 59% of our consumers have monthly data limits of 1,000 GB.

Hathway is deploying GPON FTTH Parallel network in High Potential High Penetrated DOCSIS home passes. The company sees an opportunity to increase market share by offering 200mbps – 500mbps speed to premium consumers.

The company’s cable TV business under Hathway Digital has seen a 9% drop in operating profit at Rs 36.3 crore compared to Rs 40.1 crore. The EBITDA margin was down 200 Bps to 14% from 15% a quarter ago.

Cable TV revenue remained flat at Rs 254.7 crore as against Rs 254.5 crore. Subscription revenue was up 3% at Rs 157.6 crore compared to Rs 152.6 crore. Placement revenue was flat at Rs 75.2 crore compared to Rs 74.8 crore. Activation revenue was down 22% at Rs 17.6 crore from Rs 22.7 crore.

Expenditure saw a 2% increase at Rs 218.4 crore from Rs 214.4 crore. Pay channel cost rose 5% to Rs 150 crore from Rs 142.6 crore.

The company said that the collections have grown by 24% YoY demonstrating strong improvement in efficiency. Q1-FY19 Collection efficiency is at 98%.

While the APRU from Phase I and II have remained flat the ARPU from Phase III and IV was up at Rs 75 and Rs 58 from Rs 70 and Rs 55 respectively a quarter ago. The Phase III/IV price increase, which was initiated in May, has brought 6-7% impact in Q1. The full effect of the price increase will come in Q2. The company rolled out the Phase-I and Phase-II price increase from 1st August.

The company strengthened its high definition (HD) offering to 96 channels, which is now having the highest number of HD channels across DTH/Cable players. It added 19,000 new HD customers in Q1. In July alone, the net addition was 15,000.

The total digital cable universe stands at 7.2 million while the HD customer base is at 250,000, as of July. The addition of HD customers has resulted in an incremental revenue of Rs 80/consumer/month.

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