'Investors are waiting for Cas to roll out before they come up with definite valuations' : Ravi Mansukhani - IMCL director-in-charge


Cable TV is in the midst of transition. We are seeing Cas being just implemented. Consumers are wanting set-top boxes (STBs) so that they can see their favourite pay channels. Multi-system operators (MSOs) are gearing up so that demand doesn't outstrip supply. They know this is their last chance: if they don't do it right, direct-to-home (DTH) will take over and they will become dinosaurs.

In an exclusive chat with Indiantelevision.com's Sibabrata Das, IndusInd Media and Communications Ltd director-in-charge Ravi Mansukhani discusses the dynamic changes taking place in the area of cable TV, the exciting prospects for digitisation, and the challenges that lie ahead as way of competition from emerging technologies.


HTMT had earlier decided to consolidate its media businesses under InNetwork Entertainment Ltd (INEL). What made it change track and bring IndusInd Media and Communications Ltd (IMCL) as the umbrella entity?

Suddenly the cable distribution business, which is with IMCL, has become big and is heading towards transparency under conditional access system (Cas). It has got a definite growth path now. That was not the case earlier and we thought we would bring everything under INEL which is the content company. The track has changed and content will sit on distribution. So we are merging In2Cable ( the broadband subsidiary) and INEL into IMCL. The parent company for the consolidated media business will be HTMT (an existing listed entity). The demerged IT/ITES entity will be listed under HTMT Technologies.

While Zee Telefilms has demerged its media entity, your restructuring process is actually consolidating the media business. Is this because the different lines of media business are still having nascent revenues?

We couldn't have separated the different media activities as we don't have size at this stage. We are only demerging the IT/ITES business from the media activities as we believe these have separate identities, will need independent focus, and can unlock value for the shareholders.

Will HTMT (residual) also house the real estate business?

The company will have the media businesses, Shop 24 Seven (shopping channel) and the real estate business. The demerger process is underway and a listing is expected by February-end after the restructuring process gets the necessary regulatory approvals.

Isn't this a strange mix for an investor in the company?

There is some real estate property which was sitting there earlier in the company. Since we aren't expanding on that at this stage, we are leaving it as it is. Real estate may become a play later.

How much cash will be allocated towards expanding the media business?

We will have Rs 5 billion for this. This will be used for new business initiatives, acquisitions and funding the expansion of the media and entertainment business.

Like Zee's Wire & Wireless India Ltd (WWIL), are you planning to make last mile acquisitions to expand your network?

We are adopting a different business plan where we want to partner rather than buy out operators. WWIL, on the other hand, wants to acquire 51 per cent in cable networks. Our expansion plan includes offering to operators shares in HTMT (after demerger) as they form an integral part of our distribution chain. This will be based on the subscribers they declare. No decision has been taken as to the exact ratio that would be on offer.

Will one share be issued to operators for every declared subscriber?

We are working towards that.

Do you think your strategy will be more acceptable?

We have decided that is the best way to go forward, even in the non Cas (conditional access system) areas. By becoming shareholders, operators won't perceive us as a threat. They can own their network while we make the investments on technology and digital cable. This way they can retain their customers, particularly as they face threat from DTH and other digital cable service providers. We are not exercising the buying option yet. If they want to sell, we may step in later. And by having ownership over the network, it would be in their interest to drive up ARPUs (average revenue per user) and launch value-added services.

Will ARPUs fall?

Initially, it will fall or stay flat. The subscriber ARPU in the Cas areas where we are operating is Rs 250. We see this going up to $10 (Rs 450) in two years and, perhaps, to $15 (Rs 675) in five years because of value-added services. Our topline is going to be rammed in the first year, but the bottomline is going to improve immediately as we will have an assured distribution margin.

Would you prefer inducting a strategic rather than a private equity investor?

We would favour a strategic than a pure financial investor. We feel inputs from a strategic partner would give us a competitive edge.

But the possibility of roping in an investor would likely be after the listing of the two entities.

'We are not looking at customer acquisition via bouquet packages. For the ground to open up territorially for the MSOs, it will take time.'

Are investors keen to know about the content side of your story?

Investors at this stage basically want to know our distribution plan. Our focus right now is on the distribution side of the business. Perhaps, by April we will have an investment plan for content and the other lines of media business.

Have you initiated talks with global major Liberty which has shown interest in entering into India?

There are a bunch of them who are interested in India's cable story. But all the investors are waiting for Cas to roll out before they come up with definite valuations.

Multi-system operators (MSOs) have announced bouquet packages. Do you see this as a price war to win consumers or local operators from rival networks?

Our schemes are directed to make our existing consumers happy. We are not looking at customer acquisition via packages.

Isn't there a conscious effort to protect your turf from WWIL, which wants to poach operators to increase its thin presence in Mumbai, and DTH service providers like Tata Sky?

We took care to offer a better quality package than WWIL or Tata Sky. We are offering six months of free subscription for consumers who have to pay just Rs 1500 (plus taxes) in the Cas areas. We are offering three bouquet packages - Star loaded (Sitara with 18 pay channels), Sony-led (Sona with 20 channels) and Zee-Turner (Zabardast with 35 channels). Under the STB rental scheme, we are offering the Optimiser package (Star and Sony bouquets) at Rs 120 (second TV set Rs 55) and the Super Saver scheme (Star, Sony and Zee bouquets) at Rs 190 (second TV set Rs 100). DTH has a high entry barrier as installation of the boxes are costlier than cable. And for the ground to open up territorially for the MSOs, it will take time.

With WWIL intending to poach operators, do you have a truce on the ground with Hathway Cable & Datacom?

We would like to keep the peace on the ground.

With Cas already on, do you see a situation where demand for STBs will outstrip supply?

We are confident of tackling it. We have in stock 168,000 STBs and have seeded over 40,000 boxes. We are installing more than 5,000 boxes a day. People are waking up as the pay channels are blacked out. We are ready to meet the surge in demand. We have also ordered for over 100,000 STBs from a Korean vendor.

How keen are you to beef up the content side?

We will put all our energies into distribution now. Once we have a solid distribution platform, then we are actually de-risking on the content front. We want to get into movie production and are looking at the distribution chain as well. We have earlier done movie financing and have funded around 14 movies from the current crop.

Are you going to line up special channels for Cas subscribers?

We are launching thematic channels without advertisement breaks. We have already started In Digital Premium which was made available first in Mumbai. It will also be seen in Delhi and we have movies in different themes - action-oriented, comedy and drama. We are planning to charge Rs 5-10 per movie. We will add more channels.

What are your plans for CVO?

The cable movie channel is highly popular and is licensed across 55 cities. But it has been stagnating over the last few years. With our distribution growing, it will bounce back into the growth path. We continue to acquire movies. Last year, we bought 150 movies.

Revenues from cable internet and content have been depressed. How are you planning to promote your broadband business?

We are revamping our broadband business. We will be aggressive on pricing. Our focus so far was on quality, not price. We never believed in LAN-based (local area network) internet. Now we will be doing that model. For the last two years, we concentrated on consolidating and upgrading our networks. Even we will start VoIP (Voice over Internet Protocol). We have this system connecting all our Hinduja offices across the globe. We will have to see how we can expand on that and launch commercially.

What are your revenue projections this fiscal?

We did Rs 1.6 billion last fiscal, with cable distribution accounting for Rs 1.38 billion, INEL Rs 170 million and In2Cable Rs 50 million. We are not sure how we would finally end up this fiscal as we expect the last quarter to be chaotic. But the topline should leapfrog by FY08.

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