| Cable
TV companies have attracted private equity funding and used it for consolidation
and digitalisation. But tight liquidity credit markets, intense competition to
woo local cable operators, and rise in cost structures present a challenging 2009,
says Hathway Cable & Datacom MD & CEO K Jayaraman 2008
marked the emergence of new multi-system operators (MSOs) with pan India ambitions.
This resulted in intense competition to woo the local cable operators. The year
also marked subtantial private equity/mezannine funding to some of the existing
and new MSOs. Some estimates say that the combined inflows during the year could
have reached about Rs 7 billion.
The substantial equity inflows resulted
in furthering rapid consolidation of the industry with the independent cable operators
(ICOs) partnering or entering into joint ventures with the larger MSOs. In fact
some estimates put that almost 40 per cent of the total C&S (cable & satellite)
homes could be the cumulative universe under the umbrella of the larger MSOs.
A welcome fall out of the rapid consolidation and equity flow was the intensive
pace of digital cable tv roll out. Incremental voluntary digital cable during
the year could have touched one million, based on rough estimates.
But this was again restricted to selective MSOs. Customers who opted for digital
cable enjoyed 150 plus channels at the same price as of analogue. The digital
boxes were also subsidised deeply by the MSOs. Digital cable was able to effectively
combat the competition from satellite despite the latter companies having huge
funding and high decibal advertisements. While the fob prices of cable digital
boxes fell, the gain was lost due to 20 per cent rupee depreciation during the
year.
The year also saw spiraling salary costs in the cable TV companies,
with each one outdoing the other, even as subscription income lagged. The raged
optimism arising out of projected placement fees and new capital infusion fuelled
the salary costs and other overheads too.
Sadly towards the last quarter of the calendar year due to a combination of global
meltdown and zero liquidity in the Indian banking system, the companies were sent
scurrying for cover and control over these costs. While it may not be easy to
cut these fixed costs, the situation can result in further profitability pressure
for unorthodox business models in the year 2009.
The intense competition
to woo the local cable operators (LCOs) sucked a lot of funding and, therefore,
the roll out of value added services like broadband through cable etc suffered,
barring a few whose inherent business model comprise these services too.
While the year saw rapid consolidation and new competition, sadly the core subscription
business was forgotten. Subscription income from LCOs have dipped for the industry
as a whole, except for business model where last mile also co-existed, as the
chase for territory and placement fees gained predominance. Business models and
enterprise valuations were being built around these non-conventional parameters.
Cost structures increased rapidly including pay channel costs even as the LCOs
dodged the MSOs. The
last quarter meltdown and liquidity crisis, coupled with slowing down of advertisement
income for the channels, did send ominous signals to the MSOs with non conventional
parameters. Pressure had started building rather quickly, but the difficult signs
are being ignored.
Overall, the year ended on a sombre mood with a more
challenging year 2009 in the offing. | 
