MSO Asianet deployed Rs 130 cr Capex in FY19

MUMBAI: Kerala-based multi system operator (MSO) Asianet Satellite Communications has deployed Rs 130 crore in capital expenditure (Capex) in FY19. The company had planned a substantial capex programme of about Rs 200 crore over FY18-FY19, mainly in the broadband segment, using the GPON fibre-to-home technology.

It incurred an overall capex of Rs 77.4 crore in FY18 and plans to undertake the balance expenditure of Rs 130 crore in FY19. In FY17, the company had incurred a Capex of Rs 59.4 crore.

According to India Ratings, the company’s credit metrics improved slightly in FY18 despite the large capex. The net leverage (net debt/EBITDA) improved to 1.29x in FY18 (FY17: 1.33x), primarily due to a fall in debt to Rs 202 crore (Rs 203 crore) and the rise in EBITDA.

The interest coverage improved to 7.9x in FY18 (FY17: 5.44x), surpassing Ind-Ra’s expectations, mainly because interest expenses decreased considerably to Rs 18.8 crore (Rs 26.8 crore). The agency expects the coverage and leverage ratios to stabilise at these levels in the near term.

In FY18, the company posted an EBITDA of Rs 148.9 crore compared to Rs 145.8 crore in FY17. The company’s revenue declined to Rs 430.1 crore compared to Rs 446.2 crore. EBITDA margin stood at 34.6% compared to 32.7%.

Ind-Ra noted that the company has been able to moderate its cost structure and stabilise its margins at 34% in two of the last three fiscal years since the majority of its subscribers are primary subscribers. An increase in direct cable TV and broadband expenses was more than offset by the company’s control over employee costs and other operating expenses.

The agency expects the ASCL’s margin profile to remain stable in the coming years owing to the high proportion of primary subscribers in both the cable and broadband businesses.

The rise in EBITDA was offset by the payment of cash taxes in FY18 (as opposed to availing tax refunds in FY17). As a result, the cash flow from operations fell to Rs 110.1 crore in FY18 (FY17: Rs 145 crore).

Despite this, and increased capex, the company posted positive free cash flows of Rs 33.8 crore in FY18. Furthermore, fund-based utilisation remained moderate at 43% for the 12 months ending February 2019.

Overall, the cable business remained stable, with revenue growth of only 0.6% yoy in FY18. Primary ARPUs grew 2% yoy to Rs 208 in FY18, but primary subscribers fell 3% yoy to roughly 598,000 subscribers. Secondary subscribers grew by 13% yoy to 806,000 subscribers, while secondary ARPUs rose by 43% yoy.

Asianet’s broadband segment, while historically more profitable than the cable business, under-performed in FY18. The segment usually contributes roughly 40% to the overall EBITDA, and while this remained the case in FY18, de-growth of 12% in broadband revenue led to a decline in overall revenues on a consolidated basis. The overall subscriber base remained stagnant, with no growth in primary subscribers and 1% increase in secondary subscribers.

Also, in FY18, ARPUs for primary and secondary subscribers declined to Rs 606 (FY17: Rs 713) and Rs 571 (Rs 650), respectively. The management expects this to correct in FY19 and FY20 due to the increased wire-line penetration of the broadband segment and a rise in the volume of data consumption.

Asianet, the agency noted, is strategically positioned with regard to the cross-selling of its broadband services to existing primary cable services subscribers.

Started in 1993, Asianet Satellite Communications is the largest cable network services company in Kerala, India. The company was fully taken over by the Rajan Raheja group during 1999-2000.

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