‘Our core team is working with the single-minded focus of making Siti a profitable entity’
Ever since he took over as the chief business transformation officer of Siti Networks, Rajesh Sethi, and his team’s focus has been to make the company a profitable entity. Moving in that direction, the company has undertaken several strategic steps.
On one hand, the company has focussed on improving monetisation by improving collections while on the other hand it has rationalised costs under various heads to make the company fiscally prudent. In order to rationalise content cost, the company has done reference interconnect offer (RIO) deals with a few broadcasters.
In an interview with TelevisionPost.com, Sethi spelled out his plans for the company going forward. Going into FY19, Siti’s key focus areas will be high definition (HD) penetration, broadband expansion, and improving monetisation in digital addressable system (DAS) Phase III and IV areas. Also on the anvil is a hybrid set top box (STB) to allow consumers to consume non-linear content.
You came to media and broadcasting space after spending over a decade in the financial services sector. How has the journey been for you since taking over as the chief business transformation officer of Siti Networks?
Both financial services and broadcasting are consumer-facing businesses. As the saying goes, “If Content is King, Distribution is God”. My journey in Essel Group has followed the same route. We transformed and turned-around Ten Sports leading to a very successful divestment. This was followed by riding the digitisation wave to transform a traditional media distribution entity to a lean, agile and hyper-growth entity at Zee Entertainment (ZEEL).
Over the last 9 months, we are leading the charge on transforming Siti Networks. With this move to SITI Networks, we are on the value chain’s link closest to the end customer. This is both challenging and enriching. We have started off well by charting a well-thought strategy and have undertaken a disciplined execution approach which has now started showing results. I am personally excited about the latent potential of this consumer-focused business and the team is geared up for an exponential growth trajectory.
What was the mandate given to you by the board?
The mandate given to us by our board is to transform Siti. We moved in as a transformation team of 10-15 people. Every person in the transformation team is neck deep in turning this company around. We are very happy with the way our operating metrics are moving.
How is the company progressing since you took over?
There has been a substantial improvement in our operating metrics. For 9MFY18, our revenue growth has been in the 25%+ range. The focus has been on some key expenses which have gone down. Another key area is Operating EBITDA margin which expanded by 555 bps on a 9MFY18 basis. We also put a lot of emphasis on subscription collection efficiency, which was at 95% in December.
We did a fair bit of work on expanding our digital consumer base. Our active subscriber base stands at 11.3 million as of 31st December 2017. Our core team is working with the single-minded focus of making Siti a profitable entity.
What are the initiatives you undertook to grow the revenue?
Developing and increasing ground connect has been the mainstay of our strategy at SITI in the last 9 months. We have more than 20,000 LCO partners. They play a critical role in our strategy. We got to know about their issues, gave them access to our system, and improved the Subscriber Management System (SMS) with OYC (Own Your Customer) initiative which gives access to LCOs through our in-house portals. This has yielded good results, as we have improved quite a few systems and processes and developed standard operating procedures.
We started measuring and monitoring collections which has been a key driver for improving collections. Rather than going horizontally, we went deep into critical markets.
We have rationalised our manpower by 33% focusing on higher productivity with a mantra of the right person for the right job. We optimised our geographical footprint and rationalised our infrastructure investments. We became very prudent in our expense management in general.
Content is a big cost area for distribution platforms? How did you manage to rationalise that?
We expect a double-digit growth in FY18 on our content cost. Most of our legacy deals were fixed fee in nature and it allowed us to expand rapidly across varied geographies and capture significant market share, especially in Phase 3&4 areas.
Considering the Tariff Order has been further mired in legal delays and as we await the outcome of the case currently in the Chennai High Court, we have gone ahead and stitched up deals with most of the major broadcasters based on reasonable expectations of growth. In cases, where the expectations are bordering on being unrealistic, we need to protect our and consumers interest.
We have not hesitated to go on an RIO/ a-la-carte deal with certain broadcasters and take some tough calls. Our LCO partners helped us in following through on these big decisions by holding the ground intact. We did not lose any base. That helped us in taking some aggressive position.
Broadcasters need to realise that monetisation improvement is an art and it takes time since we are working with multiple on ground factors that have causality on the ARPUs and monetisation levels. At the same time, these variables have some correlation amongst themselves as well which affect the growth of ARPUs. We expect the content cost to show a moderate increase this year in line with industry growth.
How is Siti approaching content deals with broadcasters?
For us, it is a hybrid mix of both RIO and negotiated deals. Consumer and content are the two critical elements of this game. Consumers really need to have a choice and for that content must be meaningful. We have over 700 channels in the country but none of us watches all the channels. We need to have right options. There is a lot of ‘me too’ content.
There is a lot of content that is pushed through bouquet and consumer may not want to watch it. There must be a mix where there is meaningful content. That calls for lean bouquets rather than pushing channels by broadcasters. TRAI is doing a fantastic job with the option they are bringing to customers as for delivery platforms. We are waiting for the tariff order with our fingers crossed.
Are you sorted on the content front?
We have got a reduction from another meaningful broadcaster. We are pretty well sorted.
To what extent has your content cost got rationalised?
This industry has been growing at a rate of 15-20% when it comes to cost every year. Next six months down the line when you look at our portfolio it will not grow at that rate. It will be much lower than that. There are some deals that are there till 31 March so that impact will be visible in our results. But as we go in FY19, our content cost will not grow at that rate.
Does this confidence stem from the fact that C&S Medianet will negotiate deals on behalf of Dish TV Videocon and Siti?
C&S Medianet is a consulting firm that provides advice, best practice sharing and value addition to anyone. So, anyone can avail of their services.
Between cable and broadband, which business will get more Capex?
Cable is our mainstay as 93-94% of our revenue comes from this business. Just 6-7% of our revenue comes from broadband. This year, a majority of the capex has been spent on the Cable business and we looked at deeper penetration in our existing markets in Broadband. Going forward, we intend to expand in some strategic markets in Cable whereas, in Broadband, we will see capex happening through an alternate business model.
What is your broadband strategy?
We are evaluating our plans to expand in Broadband as we strongly believe that customer is taking to viewing content in a non-linear manner. We currently have 2.47 lakh customers in broadband with 16.8 lakh home passes. Different models would include LCO capex wherein LCO undertakes more of the Capex and takes larger revenue share with Siti responsible for servicing the customer.
The Managed Service Partner model is also a possibility. We are looking at selective strategic growth in a profitable manner so that we have an optimum utilisation of the capex incurred and we achieve breakeven faster. We are firming up our strategy to bounce back as a sorted focused rather than being a ‘me-too’ player.
What are expansion plans for cable in FY19?
There are opportunities to expand in markets, both existing and new. We are already present in 580 locations and will look to leverage this reach to drive revenues.
Will you enter new markets?
If we see an opportunity to enter new markets we will consider.
How is monetisation from all four DAS markets progressing?
There has been a healthy improvement in monetisation and collection levels from our LCO partners. Our subscription collection efficiency at 95% in December has been a result of our improved ground connect. We have been effectively adhering to a Dunning policy. Our overall 9MFY18 collection efficiency has also risen to 90%.
We have also been strengthening operational engagement with our JV’s and partners. LCO-wise collection efficiencies are being targeted to improve collection efficiency across all geographies.
While ARPUs in the phase 1&2 markets have seen an incremental uptick, in Phase 3 we have increased our ARPU by 43% year on year. Our ARPU jump in Phase 4 has been even more dramatic at 140% year on year. This along with an improved collection efficiency (95% for December 2017), has improved monetization. Also, we are rapidly moving to adopt prepaid as a preferred mode of operation with our LCO Partners.
Is DTH still a big threat for cable? What do you think about the emerging threats from Telcos and OTT?
The process of digitisation was kick-started from December 2012 since the Cable Television Networks (Regulation) Amendment Act, 2011 was passed by parliament and this brought in structure, regulation, and transparency in cable distribution as a business model. Cable has been around for ages but the regulation came in just 7 years before and we have diligently been working on the ground to seed boxes phase-wise, convert from analog to digital regime, get our conditional access system and subscriber management system in place and educate the customers on the choices they have access to.
On the contrary, DTH has been around for almost 13-15 years now, which is quite a long-time frame for willing subscribers to convert to the DTH platform, but still, you see the DTH subscriber base at 50-55 million at best. This indicates that subscribers are more amenable to cable television considering the better value proposition it provides to the end customer
OTT delivered along with hybrid STBs are the way of the future. We are working on hybrid STBs for some time now. In a couple of months, you will hear some exciting news in this space.
Cable TV players have lagged behind DTH in pushing HD boxes? Will we see a more aggressive HD expansion strategy by Siti?
There is a huge headroom opportunity in getting more aggressive with HD. That’s again one focus area for the next fiscal. In DAS Phase 1 and 2, we will push for HD STBs when the old STBs are up for replacement.
HD is an experiential offering. Customers need to see the clarity and the content before purchasing it. Hence, last year, we carried out a door-to-door U&R activity in some major cities along-with a broadcaster. We approached our SD customers and gave a demo of our HD offering to them at their residence. This had a very good off-take and in FY19 we want to take this approach to more cities.
What are the top priorities for you in FY19?
FY19 is going to be about strengthening our ground connect, improving monetisation levels and ground ARPUs as we work closely with our LCO partners. It will be about disciplined execution, cost synergies, innovation with a focus on profitable growth. The aim will be to delight the end consumer as he discovers new facets of digital cable coupled with bespoke options. All of this will be governed by the triad of people, process, and product.