Hathway Cable plans to invest Rs 1.75 bn in first phase of digitisation

MUMBAI: India‘s leading multi-system operator (MSO) Hathway Cable & Datacom plans to invest Rs 1.75 billion in the first phase of digitisation even as it expects DTH to take away 10-15 per cent of its cable TV subscribers in the two lucrative markets of Delhi and Mumbai.

Hathway has ordered 1.3 million digital set-top boxes (STBs) and signed a letter of intent for another 0.5 million STBs.

"We estimate our subscriber universe to be 1.5 million (including 2nd TV) in Mumbai and Delhi. About 20 per cent of this will be second TV sets. We have a presence in Kolkata through our joint venture company and expect to seed 200,000-300,000 boxes there," said Hathway Cable & Datacom MD and CEO K Jayaraman in an interview with

Hathway has already seeded 250,000 STBs on a voluntary basis in Delhi and Mumbai.

The STBs will be subsidised and sold to customers at a price of Rs 750-790 (including taxes). "We will not sell below this even if there is a price war. We, however, feel that no player is in a position to indulge in a price war. DTH will fight for market share on the basis of perception and brand. All the Santa Clauses are broke," said

Hathway will do fixed fee deals with broadcasters and content cost in a digital environment is expected to fall in the region of 35 per cent. The local cable operators (LCOs) will get a revenue share of 30-35 per cent and the distributors five per cent. Distributors are to also get a 30 per cent share in carriage revenues. "In Mumbai, we are comfortable with the distributors. There may be some issues in Delhi but we will manage to strike a smooth bond with them," said Jayaraman.

Carriage income is expected to shrink by 30 per cent in the digital environment. "This can even go up to 50 per cent. But we will be somewhat compensated by a reduction in content cost," averred Jayaraman.

Hathway has a cash pile of Rs 2 billion and does not feel the need to raise capital in the first phase of digitisation. "We will manage with bank debt, vendor and buyer‘s credit," said Jayaraman.

For the first time, Hathway will splurge on marketing. The MSO has earmarked a spend of Rs 250 million towards advertising and the first campaign will break on 6 January.

Hathway expects to stay Ebitda positive while net losses will drag on till at least 2016. "We will regain good valuations if we manage to seed the boxes. Investors are bothered about that and not about net profitability at this stage. We expect our Ebitda to be at least in the 20-25 per cent range. We know it will be difficult at the early stage of digitisation but our endeavour will be towards achieving that range from the start," said Jayaraman.

Hathway expects the ride in the second phase to be even smoother as it has already got a large population of digital subscribers on a voluntary basis in some of these major cities like Bangalore and Hyderabad. "The second phase is looking even more promising for us," said Jayaraman.

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