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Tag: MSO

  • Vedanta-owned Sterlite bags order to provide STBs to Arasu Cable

    Vedanta-owned Sterlite bags order to provide STBs to Arasu Cable

    MUMBAI: Pune-based Sterlite Technologies has got the order for supplying two lakh set-top boxes to Tamil Nadu government-owned Arasu Cable TV Corporation Limited (ACTCL), according to a top executive.

    Sterlite Technologies, a leading global provider of transmission solutions for the power and telecom industries, is part of the Vedanta Group which has interests in aluminium, copper, zinc, lead, silver, iron ore, oil and gas and power.

    ACTCL had floated a global tender for the process of procuring STBs which also saw the participation of Wipro and Shaf Broadcast among others.
    The multi-system operator (MSO), which is yet to receive a DAS licence, needs one million STBs for digitisation.

    "Sterlite Technologies has got the contract for supplying two lakh boxes. We had advertised for one million boxes," ACTCL managing director D Vivekanandan confirmed to Indiantelevision.com.

    Vivekanandan said that the decision whether to order more boxes from Sterlite or some other company would be taken depending upon the speed of supply.

    The state-run Arasu is expecting to receive the DAS licence, for which it had applied on 5 July, soon. "It is only about time that we will get the licence. We hope to get it soon," Vivekanandan affirmed.

    However, the I&B ministry is mulling whether state-owned cable networks should be given licence to operate.

    Vivekanandan, though, has a different take on the matter. "As of now there is no rule to bar Arasu from having a licence," he said.

    Arasu, which has a firm grip on cable distribution across Tamil Nadu, had extended its cable TV services to the metro on 20 October. ACTCL had said that it would offer 200 channels to the viewers in Chennai.

    The cable TV corporation had also placed ads in in the run up to digitisation urging people to register for STBs through an advance payment of Rs 500 per STB.

    "We have received advance payments for 30,000 boxes while LCOs have requested for about nine lakh boxes. The response has been good," Vivekanandan noted.

    Earlier, Arasu Cable had floated a tender for providing digital head-ends, STBs, encryption solutions and subscriber management system (SMS) but cancelled it because it found the costs too high.

    As per data provided by the Information and Broadcasting ministry, the digital cable penetration in Chennai with 0.7 million subscribes stands at 63 per cent.

    The implementation of digitisation has been put on hold due to a stay order from Madras High Court on a petition filed by cable operators. The case is pending in the Court and will next come up for hearing on 28 December.

  • ‘Digitisation will throw open acquisition opportunities’ : IndusInd Media and Communications chief executive officer Nagesh Chhabria

    ‘Digitisation will throw open acquisition opportunities’ : IndusInd Media and Communications chief executive officer Nagesh Chhabria

    T he Hindujas have started the first round of cable TV digitisation in the three metro cities of Mumbai, Delhi and Kolkata. The second phase will open up 15 more cities where IndusInd Media and Communications Ltd (IMCL), the cable TV company they own, operates. Aggression is being planned to take on 14 more cities through acquisitions, joint ventures or direct entries.

     

    The ambitious target set is deployment of four million digital set-top boxes (STBs) on top of the 1.5 million IMCL is expecting to achieve in the first phase of digitisation. The company is also planning to own one million last mile connections in two years, up from its current base of 300,000.

     

    IMCL, which operates its cable TV business under the Incablenet brand, will need Rs 6 billion in the new phase that will see 38 cities go digital by 31 March 2013. The company is in talks with private equity investors to raise $75 million.

     

    “There is a huge appetite now to invest in cable TV companies. The first phase of digitisation has been successfully implemented in the three metro cities of Mumbai, Delhi and Kolkata. There is also no uncertainty now about India’s digitisation programme across the country. We should see equity deals happening in the sector,” says IndusInd Media and Communications chief executive officer Nagesh Chhabria.

     

    Chhabria believes the cable TV ARPUs (average revenue per user) would rise to Rs 500 by 2015, while carriage income would see a 10-15 per cent drop in DAS (digital addressable systems) markets.

     

    “In the first phase, we are looking at a 15 per cent increase and believe our ARPU would settle at Rs 225. If the ARPU is lower than this, the local cable operator will not survive,” he says.

     

    In an interview with Indiantelevision.com’s Sibabrata Das, Chhabria talks about the changing cable TV environment and the multi-system operator’s (MSO) expansion plans.

     

    Excerpts:

    Q. Is IMCL in talks with private equity investors to raise capital for funding its cable TV digitisation programme?
    We are looking at raising $75 million and have mandated Ernst & Young for this purpose. There is a huge appetite now to invest in cable TV companies. The first phase of digitisation has been successfully implemented in the three metro cities of Mumbai, Delhi and Kolkata. There is also no uncertainty now about India’s digitisation programme across the country. We should see equity deals happening in the sector.

     

    Q. Will $75 million meet IMCL’s total funding requirement for the second phase?
    We will need Rs 6 billion as we expect to deploy four million set-top boxes (STBs). We have existing lines of credit from banks for $15 million. We can further raise $10 million of new debt. So along with equity financing, we should be comfortably placed. Of course, there is concern about the weakening of the rupee, which will mean STBs becoming costlier. But we are asking our STB manufacturer to offer us a better rate so that it offsets any rise in dollar value.

     

    Q. Hasn’t IMCL lined up vendor financing so that the pressure on funding upfront eases?
    We have not gone in for that option. The Cisco set-top boxes are 15-20 per cent more expensive than ours. Our model works out cheaper for us.

     

    Q. Isn’t your estimate of the STB requirement too high as IMCL operates in only 15 out of the 38 cities that fall under digitisation in the second phase?
    It is easier now to get into new cities because there is less entry cost. You don’t have to pay broadcasters for an assumed number of subscribers as digitisation would reflect your actual subscriber base. Capital expenditure, of course, is going to be higher but there is an assured revenue model.

     

    We plan to enter into 15 more cities and anticipate a requirement of two million STBs from the new operations. For our existing operational cities, we would need two million STBs.

    ‘Even in the second phase, DTH will hardly be able to make an impact. Since most of the cities that fall in this round of digitisation are carriage markets, the national MSOs have a presence in them. Already 10 per cent of this market is digitised by the MSOs‘
    Q. Will you take the acquisition route for entering into these markets?
    Digitisation will throw open acquisition opportunities. There are many operators who will find it difficult to fund for the STBS. So they will either want somebody to invest in their cable networks or completely sell out. We are in talks with many independent operators. We can also enter on our own through fibre or available bandwidth.
     

    Q. How are valuations getting decided?
    We look at the profits made in the last fiscal and offer four times that value. The other option is to look at future profits (sans STB investment) made from the first six months of digital operations and then fix a value. But this has few takers as nobody wants to take the risk.

     

    Q. Are you not looking at last mile acquisitions that will give IMCL direct ownership of the consumer homes without having to share a portion of the subscription revenue with the local cable operator?
    We have an aggressive plan to own last mile. Our target is to own one million primary points in two years, up from our current base of 300,000. The acquisition of primary points, however, is much costlier and the price could be in the region of ten times the subscription fee. In Mumbai, this could go up to 20 times. But with digitisation necessitating billing systems, the primary points will be up for grabs.

     

    Q. Has DTH been able to eat into IMCL’s subscriber base in the first phase?
    We have hardly felt the impact. Even in the second phase, DTH will not be able to win over cable TV consumers in a big way. Since most of the cities that fall in this round of digitisation are carriage markets, the national MSOs have a presence in them. Already 10 per cent of this market is digitised by the MSOs. DTH will stand a better chance in tier III and IV towns. Acquisition of primary points in these smaller places will be a good strategy for MSOs to follow.

     

    Q. How many STBs has IMCL deployed across three cities in the first phase?
    We have already seeded 1.3 million boxes and our target is to touch 1.5 million. In Mumbai we will do 850,000 million and 0.5 million in Delhi. The progress in Kolkata is slow but it will also pick up.

     

    ‘We are looking at raising $75 mn and have mandated E&Y. There is a huge appetite now to invest in cable TV companies. The first phase of digitisation has been successfully implemented in the three metro cities of Mumbai, Delhi and Kolkata. There is also no uncertainty now about India’s digitisation programme across the country. We should see equity deals happening in the sector‘
     

    Q. Is the conversion into second TV homes significant?
    The demand for second TV sets is higher in Delhi than in Mumbai. But at a combined level we are talking of a 25-30 per cent conversion rate. We are working out a pricing for second and third TV sets as we have to match the DTH offers. But we are yet to ink deals with broadcasters on this.

     

    Q. What is the kind of content deals that you have stitched with broadcasters?
    We have done cost-per-subscriber deals. This works out better in the long term and is a more transparent system. We get to know our cost per box and it is easier to work out negotiations later. Our content cost would work out to 33 per cent of our subscription revenue.

     

    We wanted to do three-year deals with broadcasters but they were not ready for it. Most of our content deals are on a yearly basis.

     

    Q. What is the revenue share you are giving to local cable operators?
    The value chain will take away 33 per cent of our subscription revenue. We also have operational costs and an investment on the STBs, but we also earn carriage or placement revenue. We are seeing a 10-15 per cent drop in our carriage deals for DAS (digital addressable system).

     

    Q. Will ARPUs go up?
    In the first phase, we are looking at a 15 per cent increase and believe our ARPU would settle at Rs 225. If the ARPU is lower than this, the local cable operator will not survive.

     

    ARPUs for MSOs should at least be Rs 300 for them not to be dependent on carriage income. MSOs with ARPUs below Rs 300 will have to be carriage dependent.

     

    Our forecast is that cable TV ARPUs would rise to Rs 500 by 2015. What will lift up ARPUs is HD and regional packages. Premium packages will also get sold.

     

    Q. So are we talking of financially healthy MSOs in digitised India?
    A lot on how the market shapes up will be decided over the next six months. We will know the actual seeding of boxes in consumer homes once the subscription collections happen.

     

    Q. Will IMCL rely only on video services or there is a serious plan to pump up broadband investments?
    We will be investing Rs 1 billion on broadband infrastructure in the next fiscal. We are also going to prepare for IPTV and OTT (over-the-top) services.

     

    Q. What about launching local cable channels?
    Yes, this is very much a part of the plan. Since there will be no constraints on bandwidth in the digital era, we are planning to put together 10-12 local channels, including local news. We are also looking at ad-free channels.

  • IMCL in talks with PE firms to raise $75 mn

    IMCL in talks with PE firms to raise $75 mn

    MUMBAI: Hinduja-owned IndusInd Media and Communications (IMCL) is in talks with private equity investors to raise $75 million to fund the second phase of cable TV digitisation.

    IMCL has mandated Ernst & Young to find an investor for its funding requirement. "With India mandating digitisation, there is a huge appetite to invest in cable TV companies. We are looking at raising $75 million. E&Y has been given the mandate for this purpose," IndusInd Media & Communications chief executive officer Nagesh Chhabria tells Indiantelevision.com.

    IMCL, which operates its cable TV business under the Incablenet brand, will need Rs 6 billion as it is targeting four million set-top boxes (STBs). "We have existing lines of credit from banks for $15 million. We can raise $10 million of new debt," says Chhabria.

    IMCL has a debt of Rs 3 billion

    The multi-system operator (MSO) operates in 15 out of the 38 cities that fall under digitisation in the second phase. The plan is to also enter into 14 more markets. "We would require two million STBs from our existing cities. We anticipate another two million boxes from the new operations," says Chhabria.

    Will IMCL look at acquiring cable networks for entering these markets? "There are many operators who will find it difficult to fund digitisation. We are in talks with independent operators. We can also enter on our own," says Chhabria.

    IMCL has deployed 1.3 million boxes across three cities in the first phase. "Our target is 1.5 million STBs," Chhabria says.

    The government has mandated digitisation in 38 more cities by 31 March 2013, after switching to digital delivery of cable TV in Mumbai, Delhi and Kolkata from 1 November. The revised deadline for switchover to digital delivery in Chennai is likely to be decided by the Madras High Court.

  • Digitisation: Hathway needs Rs 3 bn in 2nd phase; no plans to dilute equity

    Digitisation: Hathway needs Rs 3 bn in 2nd phase; no plans to dilute equity

    MUMBAI: Hathway Cable & Datacom plans to invest Rs 3 billion for the second phase of digitisation as it details a requirement of around 3.5 million set-top boxes (STBs) to place in consumer homes across the cities where its cable TV service is available.

    Hathway will not need to raise equity financing and will fund the second phase through a mix of debt and vendor financing.

    “We are under no pressure to raise equity financing and have adequate headroom for getting additional debt. We also have vendor financing facilities. Of the total investments that we make, 70 per cent will be through vendor financing,” Hathway Cable & Datacom managing director and CEO K Jayaraman tells Indiantelevision.com.

    Hathway’s net debt stands at Rs 4.60 billion, including Rs 1 billion of vendor credit.

    The multi-system operator (MSO) has already seeded 1.5 million STBs in the 22 cities that fall under the next round of digitisation. The government has mandated 31 March 2013 as the deadline for digitisation in 38 cities, but industry experts feel an extension would be granted for a limited period.

    “Our preliminary estimate is that we would have a demand for five million STBs. We have already deployed 1.5 million boxes,” says Jayaraman.
    Hathway expects to deploy 2.5 million STBS in the first phase of digitisation where it operates in three of the four metros. While in Mumbai and Delhi it operates directly, in Kolkata it has a presence through its joint venture company Gujarat Telelinks Pvt Ltd (GTPL). GTPL, in which Hathway has 50 per cent stake, acquired majority stake in Kolkata Cable and Broadband Pariseva.

    “We have already seeded 1.7 million STBs in the three metros. We have set an internal target of 2-2.5 million boxes as we see a rising demand,” elaborates Jayaraman.

    Hathway spent Rs 1.20 billon on capital expenditure in the first half of this fiscal. For the three-month period ended 30 September, Hathway narrowed its net loss to Rs 17.84 million against Rs 158.71 in the trailing quarter. Revenue fell three per cent to 1.32 billion from Rs 1.36 billion in the first quarter.

  • Hinduja group’s Amas Mauritius gets 5.1% stake in IMCL

    Hinduja group’s Amas Mauritius gets 5.1% stake in IMCL

    MUMBAI: Amas Mauritius, a Hinduja group company, now owns 5.1 per cent equity stake in the country’s leading multi-system operator (MSO) IndusInd Media and Communications Ltd (IMCL).

    The Hindujas, thus, up their controlling stake in IMCL.

    Amas acquired the stake on conversion of 74.15 million 12 per cent cumulative redeemable preference shares of IMCL it held. The conversion was done at a price of Rs 145 per share (Rs 10 face value plus Rs 135 premium per share), following approval by the Foreign Investment Promotion Board (FIPB) and its shareholders.

    The conversion of the preference shares into equity shares resulted in Hinduja Ventures Ltd’s (HVL) stake in IMCL falling to 61.17 per cent from 65.78 per cent. HVL’s businesses include the MSO business, investments and treasury and real estate, but more than 80 per cent of the revenues come from the MSO business.

    The shares of HVL closed at Rs 483 per share, down 1.56 per cent in a flat market, on Monday on the Bombay Stock Exchange.
    The MSO’s profit before tax in the second quarter ended 30 September narrowed to Rs 199.9 million from Rs 313.1 million in the first quarter on rise in expenditure on account of digitisation. Its income in the second quarter rose to Rs 1.36 billion from Rs 1.51 billion a quarter earlier.

    The amount of capital deployed by HVL in the MSO business increased to Rs 3.96 billion from Rs 3.76 billion in the previous quarter.

    Commenting on the performance of IMCL in the second quarter, HVL whole-time director Ashok Mansukhani said the advent of compulsory digitisation will help bring transparency in subscription numbers almost fivefold and help improve the top line and bottom line of the company.

    The government has mandated digitisation in 38 more cities by 31 March 2013, after switching to digital delivery of cable TV in Mumbai, Delhi and Kolkata from 1 November. The revised deadline for switchover to digital delivery in Chennai is likely to be decided by the Madras High Court on Tuesday (tomorrow) after taking into consideration inputs from all the stakeholders.

  • MSOs divided on Trai’s ad regulation policy

    MUMBAI: Trai’s ad regulation proposal has divided two of the country’s leading multi-system operators (MSOs) into opposite camps with Digicable coming out in support while Hinduja Ventures-owned operator IndusInd Media and Communications Ltd opting for a no-regulation line.

    The regulator had initiated the policy to regulate ads on a clock hour basis on the premise that the country is moving towards digitisation and subscription income will become the primary source of revenue stream for broadcasters, an argument which the broadcasters have trashed outright.

    However, Digicable in its response to Trai’s consultation paper ‘Issues Related to Advertisements in TV Channels’ has suggested the cap to be only 10 minutes (eight minutes for commercials and two minutes for self-promotion) instead of 12 minutes proposed by Trai for FTA channels.

    For pay-channels, Digicable favours a cap of eight minutes (six minutes for commercials and two minutes for self-promotion) while it is against allowing commercials on HD channels except for two minutes in a clock hour.

    “If the broadcaster agrees to have a 100 per cent advertisement free channel, then he can have total forbearance on the subscription rate charged for that channel,” Digicable said.

    It also demanded that certain channels which are presently FTA in digital domain but pay in analog should be treated as pay till they have a uniform status across the country.

    IIMCL, on the other hand, favoured a more open market policy where consumers must be allowed to decide whether they want an ad-free channel or a free to air channel subsidised by advertisements.

    “It is up to the subscriber to opt to watch a channel with advertisements at a lower cost or pay premium to watch a channel without ads. Broadcasters on the other hand will automatically regulate the ad time as too many ad breaks will drive away subscribers, thus affecting their resources,” IIMCL said.

    Both the MSOs were in agreement that in case of sporting events, advertisements should be carried only during disruptions as most of the sportscasters are pay channels with certain sports like cricket being monetised heavily.

    In the case of News and Current Affairs channels, the two operators agreed on Trai’s proposal to run not more than two scrolls at the bottom of the screen and occupying not more than 10 per cent of the screen space for carrying non-commercial scrolls and tickers.

    The audio level of the advertisements should also not be higher than the audio level of the programme, both Digicable and IIMCL held.

    Stressing that India is not a pay market as consumers do not pay for content, Cable Operators Federation of India is of the view that the so called pay channels were introduced in India in an illegal way in the non-addressable networks by forcing cable operators to pay to receive them, once they became popular as FTA channels. For the last 18 years pay channels have been exploiting the cable operators using all unethical ways like blackmailing with threats of a black out, arbitrary increase in rates, forcing bouquets on consumers and making cartels for distribution.

    Cofi wants FTA channels to get 12 minutes ads in a clock hour and pay channels not to be allowed to carry any ads as they would get 100 per cent subscription in the digital regime.

    The cable association did not favour allowing ads in sports channels as they already charge the highest amount amongst all pay channels. It also agrees to permitting only full screen ads and not more than two scrolls at the bottom of a page for news and current affairs channels.

    Also Read:

    Trai‘s ad review policy to hurt biz models of sportscasters

    News channels ask Trai to sort out carriage before capping ad time

    TV networks flay Trai for ad regulation

  • ‘India is among our top 10 markets’ : Discovery Networks International president, CEO Mark Hollinger

    ‘India is among our top 10 markets’ : Discovery Networks International president, CEO Mark Hollinger

    India is one of Discovery‘s key priority markets along with Latin America where there is tremendous scope for pay-TV growth.

     

    Bullish about digitisation in India, Discovery has plans to expand its portfolio of channels. The latest addition in the menu: Discovery Kids from the second quarter of this calendar year.

     

    In an interview with Indiantelevision.com‘s Ashwin Pinto, Discovery Networks International president, CEO Mark Hollinger talks about the company‘s growth markets and its expansion plans in India.

     

    Excerpts:

    How important is India as a growth market for Discovery?
    India is the biggest growth market for us. It is among the top 10 markets globally for us. The combination of the government being very open to international channels, the digitisation process and the great fit between the Discovery brand and the culture of India makes this country a high priority market for us.

    Discovery has launched in many genres. When are you launching the children’s channel?
    We will launch Discovery Kids in the second quarter of this calendar year. The content will be global. We are also looking at local content. As networks grow, we have tended to have locally produced content in the mix. Discovery Kids in Latin America produces some of its own content. In India too time there will be global as well as local content as we go along.

    Is the timing right given that the kids genre is struggling?
    We tend to be long term investors. When we launched a new channel in Spain, people thought that we were crazy as unemployment rate is as as 22 per cent in that country. But we saw that there was an opportunity for us and we went ahead and launched.

     

    So whether a market is up or down at any point of time doesn‘t matter; there is space for a more education-focussed network like ours. And India, moreover, highly values education. The digitisation process is beginning and is a good opportunity for us. We are not worried about the kids genre business at all.

    Will the education component be your differentiating element?
    Yes! The other kids channels are similar. We are not Scooby Doo. We are about how you do things, when do you do, why you do. It is inquisitive in nature. Education is an important part of society. But at the same time we are not naive to think that it is just going to be education that people will tune into; it has to be entertaining as well. This was the very genesis of Discovery when John Hendricks first started it.

     

    The channel will have a healthy dose of entertainment and also satisfy the curiosity of viewers in an entertaining way. The good news is that India is a young country. There are millions of kids below the age of 14 and so the market is big.
    ‘Flagship brands have a strong place in the market. We are in a better position to survive audience fragmentation than our rivals‘

    The challenge here is that niche channels have to rely excessively on ad revenue. By when do you see subscription starting to contribute in a serious manner?
    That is a big question in terms of the impact of digitisation on the affiliate revenue stream. If you look at the international portfolio, our channels are weighted towards affiliate. 70 per cent of revenue outside the US is affiliate.

     

    When we start in a market, there is a 100 per cent affiliate revenue and then we move towards advertising. India obviously is an ad sales market. But it is hard to sit here and say what the affiliate revenue stream is going to be. We can hope that digitisation will affect carriage fees and other things.

    For the digitisation process to succeed in terms of cut off dates being achieved, what needs to happen?
    For the cable operators, it is going to be a giant challenge. If you think just about the logistics it is going to be a huge task – acquiring enough set top boxes, distributing them, getting people to understand what is going on and creating the customer service capability.

     

    Forget about fancy things like DVRs. Just to get the infrastructure in place is an enormous challenge. Luckily for us, we can watch it from afar. But once it is in place, then there is an opportunity and sort of a challenge for programmers to take advantage of digitisation. We have done it successfully in other markets.

    Do you think that the 30 June deadline will be met for the metros?
    We met some MSOs recently and they are pretty much prepared for it. Moreover, a set top box is not such a novel thing now. There are 25-30 million STBs already in DTH homes. I don’t think that the deadline is a challenge. It will be managed.

    How will digitisation change OneAlliance’s relationship with MSOs?
    This relationship will become stronger. When change happens, there is bound to be some chaos. There will be disturbance and that is the time when if you are part of a strong bouquet, you can navigate through things.

     

    We have a great team on the ground and great brands. When The OneAlliance was started, there was no digitalisation in India, no DTH. Now that there is DTH, the OneAlliance has only become stronger.

    Will you now make a concerted effort at marketing yourself to Indian consumers so that they choose you?
    This is already happening. On DTH more and more people choose us and the digital ratings of our channels are high. We offer quality content that people globally pay for. In India there is sensational television on other channels that target eyeballs at any cost. But as we move towards a digital environment, we are better prepared with quality content.

    Discovery is in several languages in India. Could you talk about the importance of localisation?
    It is important from a content point of view, from a feed structure point of view and from a language point of view. Discovery is in five languages. We are evaluating other language launch possibilities. Some of the other players have possibly gone a little bit overboard, but we have found that local language results in higher viewership in that region.

    More players are entering the infotainment and lifestyle space in India. Will this cause fragmentation?
    There is fragmentation of viewership happening. We are, however, in a better position to survive audience fragmentation than the other companies.

    Discovery spends $1 billion towards programming. Are content investments going to be affected by the global downturn?
    No! The content that we invest in is evergreen. Moreover, we can ammortise investments across 210 markets due to the nature of our products. A show will have at least a four-year life. This allows for a longer timeline in terms of investing in shows.

    Which are the main focus areas for Discovery?
    India clearly is one focus market. Latin America is also a big priority market for us; there is pay television growth to be had from there. In Brazil pay television was hampered, but now ownership has changed and pay-TV penetration is growing substantially. Poland and Russia are also big growth markets for us.

    What is the big challenge you face this year?
    It differs from market to market. In the US pay TV has a 90 per cent penetration rate. The pay TV growth there will not happen in terms of penetration. So you will see the impact of OTT and if there is enough of an upside to counterbalance any cord cutting, that may happen. Again it is hard to know if Netflix and Amazon will continue to be successful the way they have been. This is not an issue in other markets.

     

    I would say that the big challenges are the impact generally of broadband or free platforms like DTT on pay television. Can pay TV penetration continue to grow? In some countries, there are regulatory issues. Some markets like Brazil have become more protectionist as of late in terms of local Brazilian content and local channels being required on packages. The availability of alternative platforms is both a big challenge and a big opportunity.

    There has been a certain amount of operational restructuring within Discovery like the removal of the COO position. Is the basic aim to be more cost effective?
    I would say that the changes were more on the US side of the business rather than on the international scene. The international business has remained largely intact in terms of its structure. The changes were made not due to cost reasons. We have an active CEO in David Zaslav. He likes to have as few layers as possible between people who run the US business and himself. The aim is to have a better handle on the business as opposed to saving money.

    Last year you split Europe into two business units. What prompted this move?
    We used to have what I think was a bit of an odd structure. The UK is an entirely separate business. Then all of Europe, Middle East and Africa are another kind of business. UK has a lot in common with the other western European markets – slow pay TV penetration and DTT kind of opportunities.

     

    Then you have Central, Eastern Europe and the Middle East and Africa which are much more growth markets. There is still expansion to be done. These are more entrepreneurial markets. So we split along the lines of Western Europe as one unit and then Central, Eastern Europe, Middle East and Africa as another unit. We did not add a region. The international business still has four regions. We just restructured Europe to grow Western Europe and put common markets together.

    Could you talk about Discovery‘s strategy to penetrate new markets like Colombia?
    What we tend to do with new markets is to go in first and establish distribution. So we opened new offices in Central and Eastern Europe. We opened a sizeable office in Moscow. We opened other offices in places like Kiev, Almaty and Sofia.

     

    There is an opportunity in Colombia and it is our fourth biggest market in Latin America. We earlier only used a local representative for ad sales. We opened an office there for the primary purpose of ad sales while offices in Europe were opened for affiliate purposes.

    In Spain you are free to air. Are you expanding your free to air portfolio?
    This expansion has been a Western European phenomenon. In Spain pay TV has been at 30 per cent penetration for the last decade. It hasn’t grown.

     

    So now in Germany, Spain and in the UK, we have launched free to air channels. They complement the pay business and are not intended to replace it. They have allowed us to grow at a time when the overall Western Europe pay TV business is not growing. This is harder to do in other markets as there is not a big enough digital terrestrial platform or there are ownership restrictions.

    In Korea you did a partnership with CMB. Why?
    Korea is a difficult market to get into and almost impossible without a local partner. Tom (Discovery Asia Pacific MD) did an enormous amount of legwork. He spent a lot of time in Korea. It is a strong economy and very well penetrated from a pay television point of view and from a broadband point of view. So it has always been an important market for us to get into. We had to pick the right partner and have the right kind of structure in place.

    How did the JV with Oprah Winfrey for a channel come about?
    Everybody knew that Oprah would be ending her show and moving to a new business. People in the media industry wondered what that business would be. David Zaslav sold her the idea that her brand and the Discovery brand’s missions were very well suited for each other.

     

    That is how it happened. We have ambitions for the channel in terms of finding markets internationally for it. Tom is a proponent for markets in the Asia Pacific where he feels that the channel will fare well. Oprah created a lot of buzz when she came down to India. This has also been the case in Australia and in other markets around the region. But we first want it to be well established in the US.

    Discovery bought Betty in the UK, its first such acquisition of a production company. Are you looking at more such acquisitions?
    It is not yet part of Discovery‘s grand strategy to get into production. But we will see whether owning production is a strong addition to our business model or not. But I will not say that we are actively looking at other companies. We will wait and see how the Betty acquisition plays out.
  • Unlocking new opportunities via satellites: SES Sr VP Commercial Asia-Pacific and the Middle East Deepak Mathur

    Unlocking new opportunities via satellites: SES Sr VP Commercial Asia-Pacific and the Middle East Deepak Mathur

    Indian TV viewers and Internet surfers never had it so good. Seven DTH operators, 500 plus TV channels, MSOs and cable ops who are upgrading the ageing analogue infrastructure, broadband services – have all given them a slew of choices. And all of this is becoming possible thanks to satellite communications and broadcast services being offered by satellite operators.

    Consider: India is now Asia‘s leading DTH market and by 2016 will account for 72% of the region‘s DTH subscribers. Between 2012-2016, seven Indian DTH operators are expected to add more than 25 million subscribers. Broadband users (fixed, wireless, wimax, 3G) are expected to climb to about 140 million from around 30 million in end-2011 over the same period. Of the 30 million achieved so far, around 13.3 million are fixed line broadband. But the targets set by the Indian telecoms regulator under the National Broadband Plan are higher: 75 million (by end 2012) and 160 million (by 2014). Mindboggling numbers, right?

    The fact is that by leapfrogging costly fiber installs with the reach, reliability and immediacy of satellite, innovative providers are satisfying pent up demand for quality content and connectivity at a record pace.

    In six short years, DTH operators have exceeded 30% of India‘s multichannel pay TV market. DTH subscribers stand at about 45 million today. India is now the largest DTH bastion in the world and is setting the example for other emerging markets. Much of the success has been driven by high quality services and programming at affordable prices. Indian subscribers, for example, can get about 220 channels for three to four dollars a month. That includes 15 to 18 HD channels, VOD and DVR, along with distance learning and religious content choices.

    Then recently, the much-maligned-in-the-past cable TV sector is racing to meet the deadline set by the government to digitize the top four metros of Delhi, Mumbai, Chennai and Kolkata by mid-2012. Once they meet that, the next challenge will be to digitize the entire national cable TV infrastructure by 2015, leading to the total switch off of analogue signals. Clearly a battle royale is on between DTH and cable TV to gain supremacy in India‘s 150 plus million TV homes.

    Satellites are playing a lead role in the transformation of India‘s media and entertainment market. In partnership with ISRO [the Indian Space Research Organization], SES is committed to helping India‘s DTH and telecom service providers introduce a next generation of access to television and information for the masses.

    On the Horizon

    Switch back to the year 1999. Number crunchers and analysts expected that there would be just two operators with three to five million subscribers. But a liberal DTH policy encouraged three times as many players, who are investing in what could be one of the best dividend paying pay TV markets in the world. Low monthly fees, inexpensive set-top boxes and access to 200 to 300 quality channels have combined to make DTH an entertainment and information value and staple in India.
    The explosive DTH growth has taken virtually everyone by surprise and serves as a business model for other emerging markets.

    Cable operators looking to win in this market would take this opportunity to grow ARPU by offering more channels, including broadband, DVR and video on-demand. With currently 10 – 15 real HD channels being served currently, we expect this figure to increase in 2012, offering greater premium choices to India‘s sophisticated and growing middle class.

    Satellite‘s success isn‘t limited to the impressive rejuvenation of Indian television. VSAT network operators are having an equally important impact on the region, delivering high-speed broadband and life-changing, web-based services. Government agencies and businesses, from banks to gas stations, in India‘s biggest towns and cities and most remote villages and farms are increasingly relying on satellite to connect, compete and prosper.

    Unlocking a Brighter Future

    The lack of information can be a debilitating barrier to success and opportunity. India‘s farmers, for example, have long sold their wheat and cotton harvests to middlemen without real-time access to the fair market value of their hard-earned crops. Satellite enables portals such as e-Choupal to link remote farmers with up-to-the-minute crop prices, pest control tips, planting demos, even sharing examples of best practices aimed at driving ingenuity, sustainability and profitability. As a result, rural connectivity has enabled many of India‘s farmers to better prepare in managing and building a better future.

    Along with access to real-time market information, satellite is also changing the way people interact with their local government. Digitalisation is playing a key role in driving productivity in remote locations, connecting villages and linking them to crucial government programmes to enhance security, efficiency and even remote learning. Today, thanks to streamlined, internet-based solutions via satellite services, getting a birth certificate in an Indian village no longer has to take weeks or months. It‘s a web transaction that requires mere minutes.

    The potential of satellite communication abounds especially with the evolving demands of India‘s new global economy. SES is privileged to be able to play a role in enabling India‘s new economy.

    In conjunction with ISRO, SES satellites are home to the largest VSAT networks in India, with more than 120,000 VSAT terminals. These networks carry a wealth of important services, from telemedicine, e-governance initiatives, agricultural data, banking and stock information, as well as sophisticated business connectivity applications, all aimed at fueling local, regional and global access.

    DISH TV, Asia‘s largest DTH provider with over ten million subscribers, and Bharti AirTel, India‘s largest telco with more than six million subs, are contributing immensely to India‘s new information age on SES satellites. Our prime orbital slots at 95 degrees and 108 degrees east are home to India‘s premier DTH neighborhoods, which is enabling premium global news and entertainment to flow into Indian homes at mass market prices.

    India‘s DTH leaders have become experts in the field, as they grapple with distributing content in 7,000 towns, cities and villages at two to four dollar ARPUs, undeterred and strategically focused on the bigger picture. They see a brighter future of more channels, choices, advanced services and revenue growth. SES is sharing global knowledge and new ideas with our DTH provider customers across India in an effort to help them realise their ambitions, while incubating the lessons from India into other emerging markets.

    Trends to Watch

    There are some exciting trends gaining traction that are sure to drive growth and optimism across the region. High resolution and regional content will greatly enhance the viewer experience with increasing relevance.

    Look to HD to gain significant traction over the next three to four years, as DTH audiences grow more discerning in their preference for HD, offering better picture quality over standard definition programming. HD content will help to usher in tiered programming packages, enhancing consumer choices and driving up monthly subscription rates.

    With 22 official languages and eleven of them commanding well over 30 million speakers, tailored regional content will further entrench DTH throughout India and provide an additional layer of premium choices over the next three to seven years. This means that communities across the diverse fabric of our Indian society can be equipped with real-time information, relevant to them in their distinct regional environment. With the trend towards new channels and viewing shares moving away from the mainstream national channels to regional channels, consumers will increasingly be more discerning, demanding tailored local news, but also be exposed to advertising content relevant to their lifestyle, grooming a next generation of savvy consumers. The cost of advertising on these channels is expected to be significantly lower than national channels hence increasing their appeal to local advertisers. As regionalized content and ad campaigns gain momentum, this will be a tremendous driver of revenue spurring local economic growth.

    With over 30 million ethnic Indians living and working overseas in search of new challenges and opportunities, this also presents a golden opportunity for Indian broadcasters to reach out and connect the wider expatriate Indian communities. With a proven track record in building DTH communities around the world, SES can share its expertise and experience to be a strategic partner for Indian broadcasters looking to scale new heights and connect with the wider Indian community globally.

    Market Commitment

    By 2016, India will have 141 million pay TV homes, or 84% of total TV homes. Pay TV households will create revenues of US$10.3 billion. Including DTT and free DTH, India will have 117 million digital households, or 70% of total TV homes, by 2016.

    With such impressive growth rates coupled with increasing competition, it has become increasingly important to provide back up with high quality replacement and expansion capacity to match the growth ambitions of our key customers. SES understands this and is committed to the long-term success of India‘s DTH and VSAT markets with our prime orbital slots at 95 degrees east and 108 degrees east.

    Under the guidance of ISRO, SES is focused on enabling the delivery of a wealth of new services, from quality HD to localized programming and access to information for all. Satellite is enabling a special delivery of new opportunities and a brighter and connected future across India, and SES is honored to be part of this historic transformation, enabling DTH and VSAT operators to explore new possibilities and expand on their unprecedented success.

    *Figures quoted are from Informa Telecoms & Media and Media Partners Asia 2011 reports.

  • ‘Digitisation will not spur irrational price war as the Santa Clauses are broke’ : Hathway Cable & Datacom MD and CEO K Jayaraman

    ‘Digitisation will not spur irrational price war as the Santa Clauses are broke’ : Hathway Cable & Datacom MD and CEO K Jayaraman

    Hathway Cable & Datacom has an ambitious investment plan of Rs 10 billion as India opens up to digitisation across the country.

     

    In the first phase, India’s leading multi-system operator (MSO) plans to invest Rs 1.75 billion 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.

     

    Sitting on a cash pile of Rs 2 billion, Hathway will not source equity finance at this stage. Though net losses will drag on for a long period in a digital environment, the MSO hopes to regain its old valuations if it manages to successfully implement the early phase of digitisation.

     

    Even as carriage revenue will shrink, Hathway’s endeavour will be to have an Ebitda of 20-25 per cent right from the start of mandated digitisation.

     

    In an interview with Indiantelevision.com’s Sibabrata Das, Hathway Cable & Datacom MD & CEO K Jayaraman talks about how no cable or direct-to-home company is in financial health to launch an irrational price war. He also elaborates on the MSO’s digitisation gameplan.

     

     

    Excerpts:

     

    DTH companies have made rapid progress in recent years. How is Hathway Cable & Datacom prepared to exploit the first phase of digitisation?
    We plan to invest Rs 1.75 billion in the first phase. This will include Rs 200 million towards marketing in Mumbai and Delhi over the next 6-8 months. It is the first time that we are splurging on media campaigns.

    Are you comfortably placed on the funding part or you plan to raise fresh capital?
    We have a cash pile of Rs 2 billion. We will not source equity finance at this stage. We are comfortably placed and will manage with bank debt and vendor credit.

    Will you need funding in the second stage?
    We will see when we reach there. We have already digitised around two million homes. We will need to digitise our remaining 6-8 million existing homes (including multiple TVs). Our funding requirement will be Rs 10 billion as we need to subsidise the set-top box (STB) cost and make further investment in infrastructure.

    Hathway was selling at Rs 500 a STB to its customers in voluntary digitisation. Will you further subsidise the boxes in a mandated digitisation environment?
    We are looking at charging Rs 750-790 a STB (including taxes) as the rupee has depreciated against the dollar.
    “LCOs will get a revenue share of 30-35%. They will gain from 2nd TV homes, operational efficiencies and Vas. Distributors will get a 5% rev share. They will also get a 30% share in carriage revenues”

    But DTH could go aggressive and there could be a price war situation?
    We won’t sell below this even if there is a price war. We do not have the financial resources to further subsidise the boxes.

     

    We, however, feel that no player is in a position to indulge in an irrational price war. Nobody in cable can do so. DTH will fight for market share on the basis of perception and brand. All the Santa Clauses are broke.

    Are you expecting a migration to DTH?
    We expect DTH to take away 10-15 per cent of our cable TV subscribers in the two lucrative markets of Delhi and Mumbai. But we see a surge in second TV homes. Besides, we will launch three packages – lower, middle and top-end. In all the packages, we will have a price advantage. Also, we will have more channels on offer than DTH because of our bandthwidth superiority.

    Will the supply of STBs be impacted due to a sudden rise in demand?
    We have ordered 1.3 million digital STBs and signed a letter of intent for another 0.5 million. We estimate our subscriber universe to be 1.5 million in Mumbai and Delhi. About 20 per cent of this will be second TV sets.

     

    We also have a presence in Kolkata through our joint venture company, Gujarat Telelinks Pvt. Ltd (GTPL), which acquired a 51 per cent stake in Kolkata Cable and Broadband Pariseva. We expect to at least seed 400,000 boxes there.

     

    We have already seeded 250,000 STBs on a voluntary basis in Delhi and Mumbai.

    Crucial to the whole implementation of digitisation is the appeasement of the local cable operator (LCO). Have you fixed the revenue share terms with them?
    The LCOs will get a revenue share of 30-35 per cent. There will be a loss of revenue for them but they will make up to some extent with the second TV homes, where they don’t usually charge anything from the subscriber. Besides, they will gain from operational efficiencies and will discover new homes in a digital environment. Also, there will be a revenue share for them from value-added-services (Vas). So they should reasonably settle with us.

     

    The distributors will get a five per cent revenue share. They will 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.

    Why haven’t the MSOs sat down together and decided on a common share for the LCOs who control the last mile to the consumer?
    That would attract the Competition Commission of India. But in any other form, we will make efforts to drive consensus up. We don’t want any fissure surfacing among the stakeholders. We can’t afford to derail DAS (Digital Addressable System).

    Do you expect carriage revenue to shrink considerably?
    We expect it 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.

    How?
    We will do fixed fee deals with broadcasters and believe content cost in a digital scenario will fall in the region of 35 per cent. We are close to sealing deals with two big broadcasting companies.

     

    Even sports channels should allow us to price reasonably; customers should take it round-the-year. Otherwise, we will offer it on a-la-carte basis to consumers.

    Analysts predict that net losses of MSOs will drag on till at least 2016 in a digital environment?
    We can’t predict now. But Hathway aims to stay Ebitda positive. 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.

    Hathway had fixed it IPO price band at 240-265 and the scrip is now quoting at Rs 116 per share. When will the valuation be regained?
    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.

    Do you expect the second phase to be tougher for you?
    For Hathway, the ride in the second phase could be even smoother as we have already got a large population of digital subscribers on a voluntary basis in some of these major cities like Bangalore and Hyderabad. Our digital penetration in some of these cities is as high as 60 per cent. In Gujarat we have seeded 150,000 (out of our
    estimated current subscriber universe of 220,000) STBs, in Hyderabad we have 350,000 (out of 800,000) and in Bangalore we have a digital population of 275,000 (out of 400,000).

     

    And in Jaipur, Indore and Bhopal, we have a digital penetration of 40 per cent out of our current subscriber base. In Phase II, we are far ahead.

    Will you follow the acquisition route?
    We will not pursue acquisitions and will prefer to conserve capital for digitisation. We will not do any more analogue consolidation. It is bad to add analogue weight in the current circumstances. Our focus will be on digitsation.

     

    Post digitisation, we may be interested in acquisition in some of these cities. But it should come at the right price.

    Are you looking at launching value-added services?
    We will tie up with either Ericsson or Cisco for Video-on Demand (VoD) services. We will decide in March whom to partner with. We have launched HD services and also bundled it with our broadband offering. We hope it will enhance our average revenue per user (ARPU). We have 2000 HD subscribers. Given that we get Star bouquet on HD and spend on marketing, we expect HD to eventually account for 10 per cent of our subscriber base.

    Are you bullish on your broadband growth?
    Yes, that gives us an advantage over DTH. We are also ahead of the other big MSOs so far as broadband goes. We will be bundling broadband with digital cable to offer better value to the consumers. The broadband homes passed stand at 1.7 million and our actual subscribers are 400,000.
  • New Hindi news channel to spend Rs 400 mn on distribution

    New Hindi news channel to spend Rs 400 mn on distribution

    MUMBAI: Sai Prasad Media, part of the Rs 15 billion Sai Prasad Group, has earmarked Rs 400 million for the distribution of its upcoming national Hindi news channel on cable TV networks and DTH.

    News Express, the full high definition (HD) format channel, will launch in July.    
         
    “We are gearing up to launch the channel by mid-July. We are spending Rs 400 million on distribution. All our distribution deals are done and it is our biggest cost,” said the channel CEO and editor Mukesh Kumar.

    The channel has already signed carriage deals with all major multi-system operators (MSOs). “We have also signed up the direct-to-home (DTH) operators barring Tata Sky,” said Kumar.

    Sai Prasad Media is headquartered at Noida, the hub for most national news channels.

    “We have over 300 reporters across eights states,” said Kumar.

    On the content front, Kumar said that the channel will focus on politics in every walk of life. “We will have special programming based on hardcore politics, politics in a corporate setup, politics at home, in social life, etc.”

    Sai Prasad Group has varied interests in foods & beverage industry, agricultural products, petroleum, real estates, infrastructure, constructions, green energy, education and media and entertainment.