GOA: The cable TV industry, which had earlier expressed disappointment over the government’s decision to postpone cable TV digitisation in phase III and IV, now believes that delay in digitisation is good if the industry, after getting a breathing space, fixes various issues, which it witnessed in the phase I and II.
The extension would not strain the financial health of the industry as the need of the hour is to see digitisation on track after the timeline shift and create value and increase the Average Revenue Per User (ARPUs).
Some experts feel that the additional inventory carrying costs and investments in infrastructure that the industry is incurring now, would impact their topline and thus have a brunt on the bottomline.
Also, with the stable government now at the centre led by NDA, media companies can raise capital and the industry is quite bullish about the valuation benchmark.
The government had previously set a target of digitising the cable TV services in the entire country by December 2014. Information and Broadcasting Ministry recently issued a notification as per which the deadline for the areas which came in phase III was extended from 30 September 2014 to 31 December 2015 and phase IV for December 2016.
“Delay is never good. But, if one implements the learning from the first two phases, it may have a positive impact. Phase I and II haven’t so far reaped any fruits with zero value creation. The players are still fixing billing and other issues,” says HSBC Analyst Telecom associate director Rajiv Sharma, during a panel discussion on ‘Ecosystem Economics of the Future’ in Goa at IDOS 2014.
According to Exponentia Capital principal Neeraj Bhatia, the delay is a welcome development. “It was required considering the ground reality. The earlier deadline was impractical,” he adds.
“The earlier phases involved capital expenditure as more revenues were flowing through the system. MSOs were collecting less and paying more, as a result of which they saw no net benefit. So we started to question the business model and whether digitisation had anything for MSOs,” opines Bhatia.
“We are not ready for phase III and IV,” he informs.
The delay has given a breathing space to the MSOs to figure out the next step. “One needs to take a stand on various economic issues. This includes gross billing among others which impact people,” says Axis Bank group head strategic corporate group Salil Pitale.
Citing reasons for the problems faced in other phases, Sharma informs that the cable industry is a fragmented one with just six big MSOs, around 6,000 other MSOs and 70,000 LCOs.
According to the experts, value creation comes from customer ownership and thus investors will continue to invest.
The rollout of the next two phases, after the delay will be smoother as it could bring some consensus amongst stakeholders. In phase III and IV, the stakeholders should ensure that revenue comes from day one and not after two years, opines Sharma.
“While there was a tug of war between the MSOs and LCOs in the earlier two phases that need not be the case going forward. Both need to look forward and pool money,” says Bhatia.
The extension has also thrown an opportunity for MSOs to opt for voluntary digitisation, feel the experts.
There are a few financial investors who are getting excited about the growth story that digitisation proposes. “Delay is good as it also allows the MSOs and LCOs to resolve the billing issue,” explains Bhatia.
There are mixed opinions on the extension of digitisation deadline. The big question now is: ‘Can the cable TV industry fix the issues in the next one year by executing the lessons learnt?’
