MUMBAI: Hathway Cable and Datacom Ltd (HCDL), which has been one of the major players both in broadband and cable business, could be most vulnerable to the changes in the ecosphere given that much of its business is urban-centric. Now, the company is focusing on high data usage customers (more than 80 GB per month users) to remain relevant in the competition and the company will roll out more plans around this segment very soon. To have a more stable and loyal subscriber base, apart from 30,000 regular churn, it had 57,000 forced churn from low speed, low data consumption consumers.
The company had to take the step of forced regular churn because it did not want to utilize capex for them. Low pricing data plans from networks can easily lure the customers who use less than 40 GB data per month increasing the churn rate of the service provider. Especially, the bucket of 0-20 GB data has more low pricing deal seeking tendency as HCDL MD Rajan Gupta said in an earnings call. Though the company is focusing on retaining 80 GB data users, he also mentioned there’s no stress in the bucket of more than 40 GB usage.
“These customers, who were anyway not using the network, are suddenly getting the same 12-20 GB for Rs 200 even on post-paid, even with the reputed number 1 and number 2 players. So these people from January- February started asking for more and more deals. So we had two options. We could have given them deals and maintained them at Rs 300 ARPU. But then I’m blocking my capex, my CMTS, my network hubs, my data centre, which will prevent me from giving that sort of quality service to all my high data users, or I have to put much more capex. We didn’t want either of the scenarios,” Gupta explained the logic behind cleaning up “non-productive base”.
While the company currently stands with 5.5 million home passes, for the rest of this financial year it will not expand home passes any more. The focus will be on adding high usage customers within the current network. The strategy is to initially invest in growing this base through a mix of FTTH, pay TV, OTT and IoT services. In few select cities, the plan of offering home services bundling solutions along with high-speed data has already been rolled out on a four-month plan. Gupta claims to see 10 per cent increase in gross addition in those particular geographies while six to seven per cent current consumers are upgrading to it.
But before coming up with extravagant marketing strategy, it wants to get the right product first. In the next three to four months, the company will master the product and overall service. However, while ARPU has declined to Rs 690 this quarter, the initial focus is on adding value to the service of high usage customers rather than expecting a return in ARPU. Basically, the plan is revolving around J-curve growth strategy where the initial focus on service will lead to harvesting revenue and higher EBITDA growth.
Jio Giga Fiber has already lured customers with several additional amenities including Jio Giga TV set top box. In this changing scenario, Airtel and BSNL have already revised their plans. The giant DTH player Tata Sky has recently rolled out its broadband service in 12 cities. Another MSO DEN Networks has chalked out plans of working more closely with local cable operators to get a hold of last mile competition.
However, like many other experts in the industry Gupta also emphasised that with the entry of large players, the awareness about fibre to home, high speed broadband will increase because of the PR and marketing efforts. He mentioned that out of the current 17 million wire and broadband base, only 5 million is high speed broadband. On an optimistic note, he thinks eventually this 5 million will become 17 million.
“We want to make sure, in every market we operate, we have the best of solutions; either the ability to give even 1,000 GB to a consumer at a very low price or the ability to give speeds of 200-300 Mbps. On ARPU we’ll see 2-3 per cent reduction every quarter,” he added.
While the company which itself is focusing so much on broadband business sensing the demand, the question rises how OTT is affecting the churn in its cable business wing. Gupta says a high number of consumers are still sticking to cable and DTH because of low monthly pricing. He adds that OTT and cable or DTH will more and more start complimenting each other over a period.
“We don’t believe these are two very separate spaces. We believe our expertise is the last mile. We have access to consumers. Now if consumers want broadband, we are pretty much there. If consumers want OTT, we will be there. And if consumers want linear TV, which again, is not showing any sign of drop, we are already there,” he added.
In the cable TV segment, the company plans to increase phase III, phase IV ARPU by about 15 per cent. While 6 per cent has already come in Q1 owing to the price implementation, balance effect is expected to come in Q2. In the case of the first two phases, the plan is to increase ARPU by 7 per cent. As all the price changes have been implemented from the month of August, it hopes to stabilise it by September.
The company plans to have 25,000-28,000 gross additions per month in the next 9 months of FY19. Alongside that, the company is also focusing on doing underground fibre to increase the service to customers. As the entire fixed broadband business ecosystem gradually picks up thanks to more Indian, vernacular content on OTT platforms, Hathway is also taking more aggressive moves in the segment.
