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Hathway Cable’s profitability, revenue may see healthy growth

Hathway Cable’s profitability, revenue may see healthy growth
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First Published: Wed, Feb 10 2010. 10 16 PM IST

Graphic: Yogesh Kumar / Mint
Graphic: Yogesh Kumar / Mint
Updated: Wed, Feb 10 2010. 10 16 PM IST
Hathway Cable and Datacom Ltd (HCDL), a Raheja Group company, is a leading multisystems operator (MSO) and cable broadband service provider in India.
Graphic: Yogesh Kumar / Mint
The company offers analog and digital cable TV services across 125 cities and towns, and high-speed cable broadband services in 18 cities. Around 80% of the company’s revenue comes from the cable TV services and the remaining from broadband services.
The company’s strategy involves acquiring smaller MSOs, local cable operators (LCOs) and independent cable operators (ICOs) for growing its cable TV business. Currently HCDL has a reach of eight million homes with 1.6 million paying subscribers.
The cable TV business has clocked revenue at a compounded annual growth rate (CAGR) of 53% over FY2007-09 and the broadband business registered revenue at a CAGR of 38% over the same period with strong growth in the number of subscribers.
The company has been able to ramp up primary subscriber base in the past few years and intends to ensure higher proportion of primary subscribers in its subscriber base going ahead. In case of primary subscribers, the company earns a substantially higher subscription fees per subscriber as it does not have to share the same with the LCO.
Thus, it intends to add more primary subscribers to its existing subscriber base by attracting new primary subscribers, converting existing secondary subscribers into primary subscribers by acquiring LCOs and by purchasing majority interest in ICOs and MSOs that have existing primary subscriber base.
Digital cable services offer immense benefits for MSOs such as HCDL.
Offering more number of channels (HCDL offers 176 channels on the digital platform compared with only 85 on analog platform) and revenue enhancing value-added services, such as pay per view and personal video recording. Digital cable services compete well with alternative platforms such as direct-to-home (DTH) services. This reduces the risk of analog customers switching over to superior platforms.
Additionally, the digital set top box used in the technology eliminates the under-reporting of subscribers by LCOs and, thus, substantially enhances the revenues. With around one million digital subscribers (the highest in the cable industry), HCDL intends to continue growing its digital subscriber base at a rapid pace in the coming years by converting the current analog subscribers into users of digital cable services and by adding new digital subscribers.
Between 2007 and 2009, the company acquired several ICOs and MSOs. As acquisition remains one of the key growth driver, the company intends to continue acquiring majority interest in ICOs and MSOs to consolidate its position in existing markets in which it has a presence and also to expand into other states that have significant TV viewership potential for increased digital cable penetration and revenue potential.
Graphic: Yogesh Kumar / Mint
Carriage and placement fee forms a significant part of revenue. We believe carriage and placement fee received from the broadcasters forms a significant chunk of the cable business revenue. This stream of revenue grew substantially in two-three years till FY09 on the back of a slew of new channel launches across genres and tussle among broadcasters to be present at prime frequencies.
However, we believe, with the fading out of non-performing channels and pressure on the revenue of broadcasters due to a slowdown in the advertisement market growth, the carriage and placement fee is unlikely to grow in the near term. This will affect the overall growth of the cable business revenue.
With the acquisition-led strategy aided by digitization initiatives in cable TV services and the brisk pace of subscriber addition in broadband services, HCDL’s revenue is likely to grow at a healthy pace and the profitability is expected to improve substantially in the coming years.
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First Published: Wed, Feb 10 2010. 10 16 PM IST