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Tag: Ortel

  • Q1-17: Infrastructure leasing segment pulls down Ortel’s numbers

    Q1-17: Infrastructure leasing segment pulls down Ortel’s numbers

    BENGALURU: The Bibhu Prasad Rath led regional cable television and broadband internet player Ortel Communications Limited (Ortel) reported less than one third  ( 1/3.6 times) profit after tax (PAT) for the quarter ended 30 June 2016 (Q1-17, current quarter). Ortel reported PAT in Q1-17 at Rs 0.86 crore (1.6 percent margin) as compared to Rs 3.05 crore (7.5 percent margin) in the corresponding quarter of the previous year. The improved performance by company’s cable and broadband segments were pulled down by the lower execution of the company’s Infrastructure Leasing segment. Cable TV and broadband segments are the major contributors to Ortel’s numbers.

    Ortel provides services in the Indian states of Odisha, Chhattisgarh, Andhra Pradesh, Madhya Pradesh and West Bengal.

    Ortel’s Total Income from Operations (TIO) increased 29.1 percent year-over-year (y-o-y) in the current year to Rs 52.42 crore as compared to Rs 40.60 crore in Q1-16. TIO declined marginally (declined 1.6 percent) quarter-over-quarter (q-o-q) from Rs 53.28 crore in Q4-16.

    Company speak:

    Ortel President and CEO Rath said, “We have begun the year on a positive note with healthy results in our Cable Television and Broadband segments. This is reflected in the revenues which grew y-o-y by 45 percent and 26 percent respectively in Q1-17. I am also pleased to highlight that the total subscriber addition stood strong at 68,949 during the quarter taking our total subscriber base to 770,141. Our profitability however was impacted during the period under review primarily due to lower quarterly execution in the  Infrastructure Leasing business. Going forward I expect Infrastructure Leasing business to return back to normalcy in the coming quarters as execution picks up.

    Revenue breakup

    Cable TV revenue in Q1-17 increased 44.9 percent y-o-y to Rs 41.20 crore from Rs 28.43 crore in Q1-16 and increased 5.3 percent q-o-q from Rs 39.14 crore.

    Cable TV Activation fees or connection fees in Q1-17 were  almost 7 times at Rs 4.6 crore as compared to Rs 0.7 crore in Q1-16, but declined 23.8 percent q-o-q from Rs 6 crore. Cable TV subscription revenue in Q1-17 increased 38.7 percent y-o-y to Rs 27.7 crore from Rs 20 crore and increased 11.5 percent q-o-q from Rs 24.8 crore. Channel carriage fees in the current quarter increased 14.3 percent y-o-y to Rs 8.9 crore from Rs 7.8 crore and increased 7.8 percent q-o-q from Rs 8.3 crore.

    Broadband services revenue in Q1-17 increased 26 percent to Rs 9.5 crore from Rs 7.5 crore in Q1-16 and increased 6.3 percent q-o-q from Rs 8.9 crore. Internet connection fees in Q1-17 increased 13.4 percent y-o-y to Rs 0.7 crore from Rs 0.6 crore and increased 1.6 percent q-o-q. Internet subscription fees in Q1-17 increased 27 percent y-o-y to Rs 8.8 crore from Rs 7 crore and increased 6.6 percent q-o-q from Rs 8.3 crore.

    Ortel’s revenue from its infrastructure leasing segment in Q1-17 declined 75.4 percent to Rs 10 crore from Rs3.9 crore in Q1-16 and declined 78.4 percent q-o-q from Rs 4.4 crore.

    On a geographical basis, in the current quarter, revenue from Ortel’c core market – Odisha increased 13.9 percent to Rs 42.2 crore from Rs 37.1 crore but declined 5.3 percent q-o-q from Rs 44.6 crore. EBIDTA from the Odisha region in Q1-17 increased 5.5 percent y-o-y to Rs 17.2 crore from Rs 16.3 crore but declined 14.3 percent q-o-q from Rs 20.1 crore

    Revenue from Ortel’s Emerging Markets (Chhattisgarh, Madhya Pradesh, Andhra Pradesh, Telengana and West Bengal) more than tripled (3.2 times) y-o-y to Rs 9.7 crore in q1-17 from Rs 3 crore and increased 15.3 percent q-o-q from Rs 8.4 crore. Emerging markets reported lower negative EBIDTA in Q1-17 at Rs 0.7 crore as compared to a negative EIDTA of Rs 1 crore in Q1-16  and same as the negative EBIDTA of Rs 0.7 crore in Q4-16.

    Subscription numbers (revenue generating units – RGUs’), ARPU

    During the current quarter, the total subscribers (both cable and television) stood at 770,141 subscribers. Net addition in Q1-17 stood at 68,949 as compared to 74,717 subscriber additions in Q4-16. Percentage of digital TV subscribers in Q1-17 increased to 43.6 from 37.1 in the immediate trailing quarter.

    Television ARPU’s have been falling. Analog and Digital TV ARPU stood as Rs. 141 per month and Rs. 169 per month respectively. Digital ARPU in Q1-16 was Rs 185 and in Q4-16, it was Rs 178.

    The company added 5,124 broadband subscribers in Q1-17, taking its total broadband subscriber count to 77.609.

    Broadband ARPU in the current quarter increased to Rs 401 from Rs 393 in Q1-16 and Rs 398 in Q4-16.

    Let us look at the other numbers reported by Ortel in brief.

    Higher y-o-y total expenses (TE) in Q1-17 have also resulted in the lower PAT numbers for Q1-17 vis-à-vis Q1-16. Ortel’s TE in the current quarter increased 33.2 percent y-o-y to Rs 45.86 crore (87.5 percent of TIO) as compared to Rs 34.42 crore (84.8 percent of TIO), and increased 2.3 percent q-o-q from Rs 44.82 crore (84.1 percent of TIO).

    Programming cost in Q1-17 came in higher at Rs. 10 crore. Employee expenses during the current quarter stood higher y-o-y at Rs. 6.22 crore. EBITDA in Q1-17 (including other income) came in at Rs. 12.51 crore, representing a q-o-q decline of 6.1 percent.

    Note: The unit of currency in this report is the Indian rupee – Rs (also conventionally represented by INR). The Indian numbering system or the Vedic numbering system has been used to denote money values. The basic conversion to the international norm would be:

    (a) 100,00,000 = 100 lakh = 10,000,000 = 10 million = 1 crore.

    (b) 10,000 lakh = 100 crore = 1 arab = 1 billion.

  • TDSAT: IndiaCast to restore signals to Ortel against interim payment

    TDSAT: IndiaCast to restore signals to Ortel against interim payment

    NEW DELHI: IndiaCast Distribution Pvt Ltd has been directed by the Telecom Disputes Settlement and Appellate Tribunal to restore signals to Ortel Communications Ltd on receipt of a sum of Rs one crore as an interim measure. Chairman justice Aftab Alam and member B B Srivastava said that both parties should reconcile their accounts and Ortel will make the balance payment within two weeks thereof.

    The matter has been listed for further hearing on 30 May, while noting that Ortel counsel Navin Chawla did not seriously dispute the amounts due,but wanted the signals to be restored and was willing to sign a new interconnect agreement on IndiaCast’s RIO terms.

    Ortel had approached the tribunal against the disconnection notice. According to IndiaCast, Ortel had dues amounting to Rs 1.96 crore as on 31 March when the interconnect agreement came to an end and so the signal was disconnected on 28 March.

    IndiaCast counsel Ramji Srinivasan contended that Ortel had continued to disseminate the signals of his client even after 28 March and should be asked to pay for that as well. However, Chawla contested any allegation of unauthorized transmission.

    The tribunal said this issue could be raised during the reconciliation of accounts and if there was no agreement between the parties, they would have to abide by the order of the tribunal. On restoration of signals, IndiaCast was also free to hold an audit of the headends of Ortel.

    The tribunal also made it clear that after the restoration of signals, the subscription to be paid would be according to IndiaCast RIO terms expected by 1 May, subject to the final order of the tribunal. India Cast was free to disconnect in the event of failure to make payments as directed by the tribunal or non-cooperation during the reconciliation.

  • TDSAT: IndiaCast to restore signals to Ortel against interim payment

    TDSAT: IndiaCast to restore signals to Ortel against interim payment

    NEW DELHI: IndiaCast Distribution Pvt Ltd has been directed by the Telecom Disputes Settlement and Appellate Tribunal to restore signals to Ortel Communications Ltd on receipt of a sum of Rs one crore as an interim measure. Chairman justice Aftab Alam and member B B Srivastava said that both parties should reconcile their accounts and Ortel will make the balance payment within two weeks thereof.

    The matter has been listed for further hearing on 30 May, while noting that Ortel counsel Navin Chawla did not seriously dispute the amounts due,but wanted the signals to be restored and was willing to sign a new interconnect agreement on IndiaCast’s RIO terms.

    Ortel had approached the tribunal against the disconnection notice. According to IndiaCast, Ortel had dues amounting to Rs 1.96 crore as on 31 March when the interconnect agreement came to an end and so the signal was disconnected on 28 March.

    IndiaCast counsel Ramji Srinivasan contended that Ortel had continued to disseminate the signals of his client even after 28 March and should be asked to pay for that as well. However, Chawla contested any allegation of unauthorized transmission.

    The tribunal said this issue could be raised during the reconciliation of accounts and if there was no agreement between the parties, they would have to abide by the order of the tribunal. On restoration of signals, IndiaCast was also free to hold an audit of the headends of Ortel.

    The tribunal also made it clear that after the restoration of signals, the subscription to be paid would be according to IndiaCast RIO terms expected by 1 May, subject to the final order of the tribunal. India Cast was free to disconnect in the event of failure to make payments as directed by the tribunal or non-cooperation during the reconciliation.

  • Q3-2016: Activation fees boost Indian cable TV companies top & bottom lines

    Q3-2016: Activation fees boost Indian cable TV companies top & bottom lines

    BENGALURU: The Digital Addressable System (DAS) Phase III deadline has helped boost Indian cable TV companies’ top and bottom lines by way of higher than normal activation fees that they charge, and how! Be it Siti Cable, Hathway or Den Network amongst the major players in the field, the companies have reported higher revenues and profits or reduced losses for the quarter ended 31 December, 2015 (Q3-2016, current quarter). Even a regional player like Ortel saw its cable TV connections rise by 32.7 per cent, both year-on-year (YoY) and quarter-on-quarter (QoQ). It is quite likely that without the hike in activation revenue, the big three players would have reported losses.

    Another significant development that has occurred in Q3-2016 is that Siti Cable has become the largest player in terms of revenue. Until the current quarter, it was placed at number three in terms of total revenue among the four players in this report. Den now stands at number two, while Hathway is at number three. Without activation revenue, it is Den that has the highest operating revenue followed by Siti Cable, with Hathway at number three and the minnow Ortel placed at number four in Q3-2016. Please refer to Fig A below. It must be noted that Ortel’s numbers are not indicated in Fig A. Its quarterly operating revenue was in the Rs 45 – 50 crore range as compared to the Rs 300 – Rs 370 crore of the other three players mentioned in this report.

    In terms of cable subscribers, again, it is Siti Cable as well as Ortel that have added cable subscription numbers, with the Den and Hathway cable subscriber base remaining stagnant. Siti Cable added about 11 lakh subscribers in the current quarter and now stands just behind Den. Hathway has moved behind a place to number three in terms of subscriber base. Ortel’s total cable subscriber base was less than six lakh at the end of December 2015. As a part of an on-going process that began with the implementation (even before in some cases) of DAS Phase I, most multi system operators (MSOs) have been replacing analogue set-top-boxes (STBs) with digital and High Definition (HD) boxes, this report does not dwell on these replacement numbers. 

    Note: (1) 100,00,000 = 100 lakh = 10 million = 1 crore
    (2) Some figures are approximate.
    (3) Other income has not been factored in for EBIDTA in the report.
    (4) Some figures are estimates.
    (5) This report is more skewed towards the financial performance parameters in a limited way, rather than the operational and operational performance parameters of the sample companies.

    Other Revenue Streams

    Another revenue stream that is growing is wireline broadband internet (broadband). Revenue contribution from the broadband segment of each of the four companies has been increasing steadily, to the extent, that in the case of Hathway, broadband internet revenue was 26.2 per cent of operating revenue in Q2-2016 and Q3-2016. The companies have been regularly reporting increase in broadband internet subscription base. Many MSOs have been focusing on broadband internet as a growth engine for revenue and profitability because of the high average revenue per user (ARPU) that the segment brings in. Wireline Internet signals can ride on the MSOs’ existing cable fibre and they don’t have to lay fresh optics. Also, for most MSOs, it is easier to rope in existing cable subscribers for broadband internet services.

    From that point of view, Q3-2016 is an anomaly of sorts, and for this also, it is the higher than normal contribution to revenue by activation charges that is responsible. In Q3-2016, broadband revenue as percentage of operating revenue was either flat QoQ (Hathway) or has declined in the case of Siti Cable and Ortel, while it has increased marginally in the case of Den. But that does not imply that broadband revenue has declined, it is only that its contribution to overall revenue that has been affected. In absolute rupee terms, it has increased YoY and QoQ in Q3-2016 for all the four companies.

    Besides broadband, some companies such as Den have e-commerce portals and also manage a soccer team. This report does not cover those revenues.

    Cable Operations and Activation Fees, Profitability

    Cable operations revenue comprises Subscription Revenue, Activation Fees, Carriage or Placement charges and other income. Fig A1 below gives a breakup of the first three income streams of the three major players.

    Two of the four companies in this report have reported profit after tax (PAT) – Ortel and Siti Cable, while the other two have reported YoY and QoQ EBIDTA increase for the current quarter.

    Let us look at the profitable companies first from their cable operations and activation and profitability perspectives. Please refer to Fig B below.

    Siti Cable

    Last year, in Q4-2015, the Essel Group’s Dish TV reported profit for the first time and led the direct to home (DTH) industry in terms of improved numbers. The trend has continued so far. In Q3-2016, it is another Essel Group company from the carriage industry – Siti Cable that has reported profit after tax (PAT) of Rs 56 crore (15 per cent margin on operating revenue or OPREV) as compared to a loss of Rs 18.5 crore in the corresponding year ago quarter and a loss of Rs 19.4 crore in the immediate trailing quarter. The growth essentially has been driven by higher activation revenue in the current quarter due to the 11 lakh subscribers added in Q3-2016.

    Siti Cable’s activation revenue in the current quarter was almost eight times (grew 7.7 times) YoY at Rs 105 crore (28.4 per cent of OPREV) as compared to Rs 13.6 crore (6.1 per cent of OPREV) and grew by more than five times (5.4 times) QoQ as compared to Rs 19.4 crore (8.8 per cent of OPREV). EBIDTA in the current quarter more than doubled (up 2.6 times) YoY at Rs 129.9 crore as compared to Rs 50.1 crore and also more than doubled QoQ (up 2.5 times) from Rs 51.5 crore.

    Siti Cable executive director & CEO V D Wadhwa said, “Focussing on our guiding principle of creating value for all stakeholders, the company has achieved the financial turnaround for the first time in the history of the company and reported PBT of Rs 56 crore in Q3-2016 and Rs 5.1 crore for the nine months of FY16. At Siti Cable, our efforts to strive for operational excellence continue and during the quarter the company has added 1.1 million digital subscribers, over 10,000 broadband customers and achieved all-time high EBITDA growth of 159 per cent YoY. We expect this momentum to sustain in the coming quarters.”

    “We are also aggressively looking for inorganic growth opportunities in the geographies, which make strategic sense for us to expand and have acquired some networks in the western part of the country, which shall add additional 1.5 million subscribers to our existing subscriber base of 10.7 million. We strongly believe in cohesiveness among like-minded players and are actively engaged in our efforts as a consolidator in the industry,” he added.

    Ortel

    The Bibhu Prasad Rath led regional cable television and broadband internet player Ortel Communications Limited reported a 21.8 per cent YoY revenue (Total Income from Operations or TIO) at Rs 48.03 crore in the current quarter as compared to Rs 39.44 crore and 4.9 per cent QoQ growth as compared to Rs 45.79 crore. The company reported PAT in Q3-2016 at Rs 3.89 crore (8.1 per cent margin) as compared to a loss of Rs 0.1 crore in Q3-2015 and 37.5 per cent higher QoQ PAT as compared to Rs 2.83 crore (6.2 per cent margin). Ortel provides services in the Indian states of Odisha, Chhattisgarh, Andhra Pradesh, Madhya Pradesh and West Bengal.

    Ortel’s connection (activation) fees increased 32.7 per cent to Rs 1 crore as compared to Rs 0.70 crore and increased 33.8 per cent as compared to Rs 0.70 crore. Ortel’s YoY revenue generating units (RGU) grew 19 per cent to 626,475 as compared to 526,551 and increased 9.6 per cent QoQ as compared to 571,834 in Q2-2016. Cable TV RGUs increased 19.3 per cent YoY in Q3-2016 to 558,766 as compared to 468,274 and increased 10 per cent as compared to 508,171 in Q2-2016. Ortel’s YoY primary digital cable RGUs grew 33.9 per cent to 127,098 in Q3-2016 as compared to 94,926 in the corresponding prior year quarter and grew 8.3 per cent QoQ to 117,401. The company says that its cable TV penetration stood at 23.7 per cent in the current quarter.

    Ortel president and CEO Rath said, “I am delighted to share that our key strategy of LCO buyout is receiving huge response in our markets. Healthy addition to RGUs has led to strong growth of 38 per cent in bottom-line on a Q-o-Q basis. Given the strong pipeline of RGUs yet to be integrated, we are confident of improving upon this solid performance in the coming quarters.”

    “FY-2016 will be one-of-the-best-years in the history of Ortel Communications backed by record RGU additions and solid visibility for LCO buyouts in the coming year. With more than 90 per cent subscribers on ‘last mile,’ we remain committed to this model and strongly believe it will create tremendous value for all stakeholders going forward,” he added.

    Hathway

    Indian MSO Hathway Cable and Datacom Limited reported 25.6 per cent YoY growth in standalone Total Income from Operations (TIO) in Q3-2016 at Rs 300.43 crore as compared to Rs 239.15 crore and 9.6 per cent more than the Rs 270.03 crore in Q2-2016.

    Activation revenue in Q3-2016 more than tripled (3.1 times) YoY to Rs 22.3 crore as compared to Rs 7.2 crore and was almost fivefold (4.7 times) the Rs 4.5 crore in Q2-2016.

    The company’s EBIDTA (excluding other income) in Q3-2016 more than doubled (by 2.02 times) YoY to Rs 49.81 crore (16.6 per cent margin) as compared to Rs 24.58 crore (10.3 per cent margin) and increased 45.8 per cent QoQ as compared to Rs 34.15 crore (12.5 per cent margin) in the immediate trailing quarter. 

    Hathway’s loss in the current quarter reduced to Rs 32.58 crore, in Q3-2015 it was Rs 58.05 crore and in the immediate trailing quarter it was Rs 48.94 crore.

    Den Networks

    Den has reported activation revenue of Rs 86 crore in Q3-2016, more than fivefold YoY as compared to the Rs 15 crore in Q3-2015 and more the than three times the Rs 27 crore in the immediate trailing quarter. The company says that it has added nine lakh digital subscribers in the current quarter, taking its digital subscriber base to 85 lakh as compared to the 76 lakh in the previous quarter. The company had reported a digital subscriber base of 68 lakh for the Q3-2015, hence the share of its digital subscriber base has gone up from 58 per cent in Q3-2015 to 65 per cent in the current quarter. The company says that its Cable DAS ARPU has increased 3.8 per cent to Rs 80 in the current quarter as compared to Rs 77 in the immediate trailing quarter.

    Den reported a lower YoY and QoQ consolidated loss of Rs 48.37 crore in the current quarter as compared to a loss of Rs 62.60 crore in Q3-2015 and a loss of Rs 75.23 crore in the immediate trailing quarter.

    The company reported EBIDTA of Rs 42.99 crore (12.2 per cent margin) in the current quarter as compared to an operating profit of Rs 0.28 crore (0.1 per cent margin) in Q3-2015 and an operating loss of Rs 11.27 crore in the immediate trailing quarter. The company’s pre-Activation Cable EBIDTA in the current quarter was Rs 6 crore as compared to the Rs 34 crore in Q3-2015 and a negative Cable EBIDTA of Rs 5 crore in Q2-2016.

    Broadband

    As mentioned above, while broadband revenue in the current quarter has increased YoY and QoQ for all the four companies in this report, it contribution to overall revenues has gone down in the case of two companies, is stable in the case of another one and has increased fractionally in the case of fourth company. Please refer to Fig C below.

    Hathway’s Broadband subscription revenue in Q3-2016 increased 53.4 per cent YoY to Rs 78.7 crore as compared to Rs 57.7 crore and increased 9.5 per cent QoQ as compared to Rs 57.7 crore.

    Siti Cable Broadband revenue in the current quarter almost doubled (grew 99 per cent) at Rs 13.9 crore (3.8 per cent of OPREV) as compared to Rs 7 crore (3.2 per cent of OPREV) in Q3-2015 and increased 49.5 per cent QoQ as compared to Rs 9.3 crore (four per cent of OPREV).

    Den has also ramped up its broadband subscribers by 33.3 per cent to 76,000 in the current quarter from 57,000 in the immediate trailing quarter. The company’s broadband segment revenue increased by over five times YoY (5.5 times) at Rs 11.96 crore (3.4 per cent of TIO) as compared to Rs 2.17 crore (0.8 per cent of TIO) in corresponding prior year quarter and increased 58 per cent QoQ as compared to Rs 8.23 crore (three per cent of TIO). The segment’s YoY operating loss increased to Rs 19.57 crore as compared to Rs 12.37 crore, but reduced QoQ as compared to Rs 23.07 crore. The company says that broadband ARPU has declined by Rs 10 in the current quarter to Rs 760 from Rs 770 in the previous quarter.

    Den’s Broadband Post Activation EBIDTA in Q3-2016 was negative Rs 16 crore as compared to the negative Rs 11 crore in Q3-2015 and negative Rs 20 crore in Q2-2016.

    Ortel’s broadband segment reported 16.3 per cent higher revenue at Rs 8.28 crore as compared to Rs 7.12 crore in the corresponding year ago quarter and 1.7 per cent more than the Rs 8.14 crore in Q2-2016. The broadband segment reported an operating profit of Rs 4.78 crore in the current quarter as compared to Rs 4.52 crore in Q3-2015 and 9.1 per cent higher than the Rs 438 crore in Q2-2016.

    Ortel’s Rath said, “Broadband business continues to do well and remains a key focus area for us. We are working towards delivering notable growth in subscriber base, which would further augment our performance and overall profitability.”

    Concluding remarks

    With 31 December, 2016 as the sunset date for DAS phase IV, the next four quarters should be growth periods for the carriage industry – this includes cable, DTH and HITS (head-end in the sky) companies. How and how well they exploit this opportunity will decide their fate in the medium to long term. Two of the players in this report – Siti Cable and Ortel have said that they are looking at organic growth, and the growth in their subscription base over the past few quarters is a clear indication of that intent. Companies’ toplines and bottomlines will definitely grow over the next few quarters.

    Cable industry players face competition from the existing internet service players like the behemoth Airtel, which is the second largest wireline broadband player in the country after the public sector BSNL. While BSNL and the third largest wireline internet services player in the country – another public sector company MTNL, have been stagnating or losing in terms of subscribers, another MSO, a regional player, ACT Broadband is the fourth largest wireline broadband internet services company in the country. ACT had about 8.4 lakh subscribers at the end of November 2015. It has laid separate optic fibre for internet, rather than let it ride on its cable fibre network and has been canvassing for customers as a pure wireline internet services player in areas where it does not have cable subscribers.

    The race between activation fees and broadband revenue in terms of growth is likely to continue over the next few quarters, until the industry reaches maturity and activation revenues peter out. It remains to be seen how the companies will perform once the big revenue stream from activation fees dries up. Notwithstanding, the court stays that some players in carriage industry will obtain to delay the digitisation process, the next 24 months should be an interesting time for carriage ecosystem as it matures.

  • Q3-2016: Activation fees boost Indian cable TV companies top & bottom lines

    Q3-2016: Activation fees boost Indian cable TV companies top & bottom lines

    BENGALURU: The Digital Addressable System (DAS) Phase III deadline has helped boost Indian cable TV companies’ top and bottom lines by way of higher than normal activation fees that they charge, and how! Be it Siti Cable, Hathway or Den Network amongst the major players in the field, the companies have reported higher revenues and profits or reduced losses for the quarter ended 31 December, 2015 (Q3-2016, current quarter). Even a regional player like Ortel saw its cable TV connections rise by 32.7 per cent, both year-on-year (YoY) and quarter-on-quarter (QoQ). It is quite likely that without the hike in activation revenue, the big three players would have reported losses.

    Another significant development that has occurred in Q3-2016 is that Siti Cable has become the largest player in terms of revenue. Until the current quarter, it was placed at number three in terms of total revenue among the four players in this report. Den now stands at number two, while Hathway is at number three. Without activation revenue, it is Den that has the highest operating revenue followed by Siti Cable, with Hathway at number three and the minnow Ortel placed at number four in Q3-2016. Please refer to Fig A below. It must be noted that Ortel’s numbers are not indicated in Fig A. Its quarterly operating revenue was in the Rs 45 – 50 crore range as compared to the Rs 300 – Rs 370 crore of the other three players mentioned in this report.

    In terms of cable subscribers, again, it is Siti Cable as well as Ortel that have added cable subscription numbers, with the Den and Hathway cable subscriber base remaining stagnant. Siti Cable added about 11 lakh subscribers in the current quarter and now stands just behind Den. Hathway has moved behind a place to number three in terms of subscriber base. Ortel’s total cable subscriber base was less than six lakh at the end of December 2015. As a part of an on-going process that began with the implementation (even before in some cases) of DAS Phase I, most multi system operators (MSOs) have been replacing analogue set-top-boxes (STBs) with digital and High Definition (HD) boxes, this report does not dwell on these replacement numbers. 

    Note: (1) 100,00,000 = 100 lakh = 10 million = 1 crore
    (2) Some figures are approximate.
    (3) Other income has not been factored in for EBIDTA in the report.
    (4) Some figures are estimates.
    (5) This report is more skewed towards the financial performance parameters in a limited way, rather than the operational and operational performance parameters of the sample companies.

    Other Revenue Streams

    Another revenue stream that is growing is wireline broadband internet (broadband). Revenue contribution from the broadband segment of each of the four companies has been increasing steadily, to the extent, that in the case of Hathway, broadband internet revenue was 26.2 per cent of operating revenue in Q2-2016 and Q3-2016. The companies have been regularly reporting increase in broadband internet subscription base. Many MSOs have been focusing on broadband internet as a growth engine for revenue and profitability because of the high average revenue per user (ARPU) that the segment brings in. Wireline Internet signals can ride on the MSOs’ existing cable fibre and they don’t have to lay fresh optics. Also, for most MSOs, it is easier to rope in existing cable subscribers for broadband internet services.

    From that point of view, Q3-2016 is an anomaly of sorts, and for this also, it is the higher than normal contribution to revenue by activation charges that is responsible. In Q3-2016, broadband revenue as percentage of operating revenue was either flat QoQ (Hathway) or has declined in the case of Siti Cable and Ortel, while it has increased marginally in the case of Den. But that does not imply that broadband revenue has declined, it is only that its contribution to overall revenue that has been affected. In absolute rupee terms, it has increased YoY and QoQ in Q3-2016 for all the four companies.

    Besides broadband, some companies such as Den have e-commerce portals and also manage a soccer team. This report does not cover those revenues.

    Cable Operations and Activation Fees, Profitability

    Cable operations revenue comprises Subscription Revenue, Activation Fees, Carriage or Placement charges and other income. Fig A1 below gives a breakup of the first three income streams of the three major players.

    Two of the four companies in this report have reported profit after tax (PAT) – Ortel and Siti Cable, while the other two have reported YoY and QoQ EBIDTA increase for the current quarter.

    Let us look at the profitable companies first from their cable operations and activation and profitability perspectives. Please refer to Fig B below.

    Siti Cable

    Last year, in Q4-2015, the Essel Group’s Dish TV reported profit for the first time and led the direct to home (DTH) industry in terms of improved numbers. The trend has continued so far. In Q3-2016, it is another Essel Group company from the carriage industry – Siti Cable that has reported profit after tax (PAT) of Rs 56 crore (15 per cent margin on operating revenue or OPREV) as compared to a loss of Rs 18.5 crore in the corresponding year ago quarter and a loss of Rs 19.4 crore in the immediate trailing quarter. The growth essentially has been driven by higher activation revenue in the current quarter due to the 11 lakh subscribers added in Q3-2016.

    Siti Cable’s activation revenue in the current quarter was almost eight times (grew 7.7 times) YoY at Rs 105 crore (28.4 per cent of OPREV) as compared to Rs 13.6 crore (6.1 per cent of OPREV) and grew by more than five times (5.4 times) QoQ as compared to Rs 19.4 crore (8.8 per cent of OPREV). EBIDTA in the current quarter more than doubled (up 2.6 times) YoY at Rs 129.9 crore as compared to Rs 50.1 crore and also more than doubled QoQ (up 2.5 times) from Rs 51.5 crore.

    Siti Cable executive director & CEO V D Wadhwa said, “Focussing on our guiding principle of creating value for all stakeholders, the company has achieved the financial turnaround for the first time in the history of the company and reported PBT of Rs 56 crore in Q3-2016 and Rs 5.1 crore for the nine months of FY16. At Siti Cable, our efforts to strive for operational excellence continue and during the quarter the company has added 1.1 million digital subscribers, over 10,000 broadband customers and achieved all-time high EBITDA growth of 159 per cent YoY. We expect this momentum to sustain in the coming quarters.”

    “We are also aggressively looking for inorganic growth opportunities in the geographies, which make strategic sense for us to expand and have acquired some networks in the western part of the country, which shall add additional 1.5 million subscribers to our existing subscriber base of 10.7 million. We strongly believe in cohesiveness among like-minded players and are actively engaged in our efforts as a consolidator in the industry,” he added.

    Ortel

    The Bibhu Prasad Rath led regional cable television and broadband internet player Ortel Communications Limited reported a 21.8 per cent YoY revenue (Total Income from Operations or TIO) at Rs 48.03 crore in the current quarter as compared to Rs 39.44 crore and 4.9 per cent QoQ growth as compared to Rs 45.79 crore. The company reported PAT in Q3-2016 at Rs 3.89 crore (8.1 per cent margin) as compared to a loss of Rs 0.1 crore in Q3-2015 and 37.5 per cent higher QoQ PAT as compared to Rs 2.83 crore (6.2 per cent margin). Ortel provides services in the Indian states of Odisha, Chhattisgarh, Andhra Pradesh, Madhya Pradesh and West Bengal.

    Ortel’s connection (activation) fees increased 32.7 per cent to Rs 1 crore as compared to Rs 0.70 crore and increased 33.8 per cent as compared to Rs 0.70 crore. Ortel’s YoY revenue generating units (RGU) grew 19 per cent to 626,475 as compared to 526,551 and increased 9.6 per cent QoQ as compared to 571,834 in Q2-2016. Cable TV RGUs increased 19.3 per cent YoY in Q3-2016 to 558,766 as compared to 468,274 and increased 10 per cent as compared to 508,171 in Q2-2016. Ortel’s YoY primary digital cable RGUs grew 33.9 per cent to 127,098 in Q3-2016 as compared to 94,926 in the corresponding prior year quarter and grew 8.3 per cent QoQ to 117,401. The company says that its cable TV penetration stood at 23.7 per cent in the current quarter.

    Ortel president and CEO Rath said, “I am delighted to share that our key strategy of LCO buyout is receiving huge response in our markets. Healthy addition to RGUs has led to strong growth of 38 per cent in bottom-line on a Q-o-Q basis. Given the strong pipeline of RGUs yet to be integrated, we are confident of improving upon this solid performance in the coming quarters.”

    “FY-2016 will be one-of-the-best-years in the history of Ortel Communications backed by record RGU additions and solid visibility for LCO buyouts in the coming year. With more than 90 per cent subscribers on ‘last mile,’ we remain committed to this model and strongly believe it will create tremendous value for all stakeholders going forward,” he added.

    Hathway

    Indian MSO Hathway Cable and Datacom Limited reported 25.6 per cent YoY growth in standalone Total Income from Operations (TIO) in Q3-2016 at Rs 300.43 crore as compared to Rs 239.15 crore and 9.6 per cent more than the Rs 270.03 crore in Q2-2016.

    Activation revenue in Q3-2016 more than tripled (3.1 times) YoY to Rs 22.3 crore as compared to Rs 7.2 crore and was almost fivefold (4.7 times) the Rs 4.5 crore in Q2-2016.

    The company’s EBIDTA (excluding other income) in Q3-2016 more than doubled (by 2.02 times) YoY to Rs 49.81 crore (16.6 per cent margin) as compared to Rs 24.58 crore (10.3 per cent margin) and increased 45.8 per cent QoQ as compared to Rs 34.15 crore (12.5 per cent margin) in the immediate trailing quarter. 

    Hathway’s loss in the current quarter reduced to Rs 32.58 crore, in Q3-2015 it was Rs 58.05 crore and in the immediate trailing quarter it was Rs 48.94 crore.

    Den Networks

    Den has reported activation revenue of Rs 86 crore in Q3-2016, more than fivefold YoY as compared to the Rs 15 crore in Q3-2015 and more the than three times the Rs 27 crore in the immediate trailing quarter. The company says that it has added nine lakh digital subscribers in the current quarter, taking its digital subscriber base to 85 lakh as compared to the 76 lakh in the previous quarter. The company had reported a digital subscriber base of 68 lakh for the Q3-2015, hence the share of its digital subscriber base has gone up from 58 per cent in Q3-2015 to 65 per cent in the current quarter. The company says that its Cable DAS ARPU has increased 3.8 per cent to Rs 80 in the current quarter as compared to Rs 77 in the immediate trailing quarter.

    Den reported a lower YoY and QoQ consolidated loss of Rs 48.37 crore in the current quarter as compared to a loss of Rs 62.60 crore in Q3-2015 and a loss of Rs 75.23 crore in the immediate trailing quarter.

    The company reported EBIDTA of Rs 42.99 crore (12.2 per cent margin) in the current quarter as compared to an operating profit of Rs 0.28 crore (0.1 per cent margin) in Q3-2015 and an operating loss of Rs 11.27 crore in the immediate trailing quarter. The company’s pre-Activation Cable EBIDTA in the current quarter was Rs 6 crore as compared to the Rs 34 crore in Q3-2015 and a negative Cable EBIDTA of Rs 5 crore in Q2-2016.

    Broadband

    As mentioned above, while broadband revenue in the current quarter has increased YoY and QoQ for all the four companies in this report, it contribution to overall revenues has gone down in the case of two companies, is stable in the case of another one and has increased fractionally in the case of fourth company. Please refer to Fig C below.

    Hathway’s Broadband subscription revenue in Q3-2016 increased 53.4 per cent YoY to Rs 78.7 crore as compared to Rs 57.7 crore and increased 9.5 per cent QoQ as compared to Rs 57.7 crore.

    Siti Cable Broadband revenue in the current quarter almost doubled (grew 99 per cent) at Rs 13.9 crore (3.8 per cent of OPREV) as compared to Rs 7 crore (3.2 per cent of OPREV) in Q3-2015 and increased 49.5 per cent QoQ as compared to Rs 9.3 crore (four per cent of OPREV).

    Den has also ramped up its broadband subscribers by 33.3 per cent to 76,000 in the current quarter from 57,000 in the immediate trailing quarter. The company’s broadband segment revenue increased by over five times YoY (5.5 times) at Rs 11.96 crore (3.4 per cent of TIO) as compared to Rs 2.17 crore (0.8 per cent of TIO) in corresponding prior year quarter and increased 58 per cent QoQ as compared to Rs 8.23 crore (three per cent of TIO). The segment’s YoY operating loss increased to Rs 19.57 crore as compared to Rs 12.37 crore, but reduced QoQ as compared to Rs 23.07 crore. The company says that broadband ARPU has declined by Rs 10 in the current quarter to Rs 760 from Rs 770 in the previous quarter.

    Den’s Broadband Post Activation EBIDTA in Q3-2016 was negative Rs 16 crore as compared to the negative Rs 11 crore in Q3-2015 and negative Rs 20 crore in Q2-2016.

    Ortel’s broadband segment reported 16.3 per cent higher revenue at Rs 8.28 crore as compared to Rs 7.12 crore in the corresponding year ago quarter and 1.7 per cent more than the Rs 8.14 crore in Q2-2016. The broadband segment reported an operating profit of Rs 4.78 crore in the current quarter as compared to Rs 4.52 crore in Q3-2015 and 9.1 per cent higher than the Rs 438 crore in Q2-2016.

    Ortel’s Rath said, “Broadband business continues to do well and remains a key focus area for us. We are working towards delivering notable growth in subscriber base, which would further augment our performance and overall profitability.”

    Concluding remarks

    With 31 December, 2016 as the sunset date for DAS phase IV, the next four quarters should be growth periods for the carriage industry – this includes cable, DTH and HITS (head-end in the sky) companies. How and how well they exploit this opportunity will decide their fate in the medium to long term. Two of the players in this report – Siti Cable and Ortel have said that they are looking at organic growth, and the growth in their subscription base over the past few quarters is a clear indication of that intent. Companies’ toplines and bottomlines will definitely grow over the next few quarters.

    Cable industry players face competition from the existing internet service players like the behemoth Airtel, which is the second largest wireline broadband player in the country after the public sector BSNL. While BSNL and the third largest wireline internet services player in the country – another public sector company MTNL, have been stagnating or losing in terms of subscribers, another MSO, a regional player, ACT Broadband is the fourth largest wireline broadband internet services company in the country. ACT had about 8.4 lakh subscribers at the end of November 2015. It has laid separate optic fibre for internet, rather than let it ride on its cable fibre network and has been canvassing for customers as a pure wireline internet services player in areas where it does not have cable subscribers.

    The race between activation fees and broadband revenue in terms of growth is likely to continue over the next few quarters, until the industry reaches maturity and activation revenues peter out. It remains to be seen how the companies will perform once the big revenue stream from activation fees dries up. Notwithstanding, the court stays that some players in carriage industry will obtain to delay the digitisation process, the next 24 months should be an interesting time for carriage ecosystem as it matures.

  • Odhisa HC recognises Ortel’s representation on DAS Phase III; urges MIB to give it two months

    Odhisa HC recognises Ortel’s representation on DAS Phase III; urges MIB to give it two months

    MUMBAI: Is another state joining the ranks of those who have asked for – and have been given – time to be able to implement digitisation in Digital Addressable System (DAS) Phase III areas? If initial indications are to be believed, the answer is yes. According to our sources, the Odhisa High Court has directed the Ministry of Information and Broadcasting (MIB) to act on the representation given by Last Mile Owner (LMO) Ortel Communications.  
     

    The LMO had presented various teething issues relating to digitisation, which were leading to delays in meeting the deadline date in Phase III areas, to the MIB. But the ministry, apparently ignored Ortel’s representations. Following which the company approached the Odhisa High Court. 

     

    “We are totally in favor of digitisation and are always ready to support it in every possible way. Our petition is not against DAS; our concern is the unavailability of various important aspects, which is proving to be a handicap for us,” asserts a senior company official.

     

    Shortage of set top boxes (STBs) was the main concern in the submitted representation, which also had consumer resistance and capital crisis in it, among others. 

    “The court recognised the STB drought and has directed the MIB to address the issue in two months’ time. Meanwhile, the court has also directed that no action should to be taken against Ortel before the representation is addressed,” a source present in the court tells Indiantelevision.com.

     

    “This direction of the court is for Ortel communications and its operations, and not an overall Odhisa statement,” clarified the source in the court.
     

    But given the strong hold Ortel has over Odhisa as the main provider of cable TV there, it probably means an extension of the digitisation deadline in the state, say industry sources. 
     

    Also read: DAS Phase III stayed in 5 states including Maharashtra

  • Q2-2016: Ortel YoY revenue up 24.6 percent, PAT more than doubles

    Q2-2016: Ortel YoY revenue up 24.6 percent, PAT more than doubles

    BENGALURU: The Bibhu Prasad Rath-headed regional cable television and broadband internet player Ortel Communications Ltd  (Ortel) has reported a 24.6 percent growth in revenue from operations (TIO) at Rs 45.79 crore as in the quarter ended 30 September 2015 (Q2-2016, current quarter) as compared to the Rs 36.74 crore in the corresponding year ago quarter. TIO in the current quarter was also higher by 12.8 percent as compared to the Rs 40.6 crore in the immediate trailing quarter. Ortel provides services in the Indian states of Odisha, Chhattisgarh, Andhra Pradesh, Madhya Pradesh and West Bengal,

     

    Notes: 100,00,000 = 100 lakh = 10 million = 1 crore

    The numbers mentioned in this report are standalone.

     

    The company reported more than a doubling of PAT (up 2.3 times) to Rs 2.83 crore (5.9 percent margin) as compared to the Rs 1.23 crore (3 percent margin) in Q2-2015, and 15.9 percent more than the Rs 2.44 crore (5.7 percent margin) in the immediate trailing quarter.

     

    Ortel President and CEO Rath said, “I am glad to report a strong operational and financial performance for the quarter ended   September 30, 2015. Performance during the quarter was driven by healthy addition in revenue generating units (RGUs) which stood at 571,834. We are witnessing encouraging traction to our LCO buyout strategy in emerging markets like Andhra Pradesh and Chhattisgarh, and I am confident that this would sustain going forward. Going forward, we would continue with our strategy of aggressive LCO buyouts across all our markets and diligently integrate the new  subscribers into Ortel’s last mile network. Healthy contribution from new RGUs along with ongoing focus on the high margin Broadband business would enable us to deliver strong financial performance in the forthcoming years.”

     

    The company’s EBIDTA (TIO plus Depreciation and Amortisation plus Other Income plus Fixed assets written off minus Total Expenditure) increased 31.3 percent to Rs 17.29 crore (37.8 percent margin) in the current quarter as compared to the Rs 13.17 crore (35.8 percent margin) and increased 8.8 percent as compared to the Rs 15.89 crore (39.1 percent margin) in Q1-2016.

     

    Ortel’s YoY RGUs grew 9.2 percent to 571,834 in Q2-2016 from 523,833 in Q2-2015 and increased 5.5 percent from 542,217 in Q1-2016.

     

    Cable TV RGUs’ increased 9 percent in Q2-2016 to 508,171 from 466,305 in Q2-2015 and grew 5.6 percent from 481,317 in Q1-2016.

    Ortel’s YoY primary digital cable RGUs grew 33.2 percent to 117,401 in Q2-2016 from 88,106 and grew QoQ to 4.5 percent from 112,296 in Q1-2016. Analogue cable RGUs’ increased to 330,739 from 322,175 in Q2-2015 and from 307,923 in Q1-2016. The company says that its Cable TV penetration stood at 23.7 percent and penetration in select 10 towns where company offers digital services stands at 71 percent.

     

    Broadband customers grew 8.9 percent to 63,663 in the current quarter from 57,528 in Q2-2015 and grew 4.5 percent from 60,900 in Q1-2016.

     

    The company has reported a slight drop in digital and analogue cable and broadband ARPUs’ in the current quarter. Digital cable ARPU in Q2-2016 was Rs 183 in Q2-2016; Rs 187 in Q2-2015 and Rs 185 in Q1-2016. Analogue cable ARPU in Q2-2016 was Rs 143; in Q2-2015 it was Rs 147 and in Q1-2016, it was Rs 144. Broadband ARPU in Q2-2016 was Rs 183, in Q2-2015, it was Rs 187 and in Q1-2016, it was Rs 185.

     

     

    Cable Subscription, Connection and Channel carriage fees

     

    The company’s cable subscription fees in Q2-2016 increased 4 percent to Rs 20.6 crore as compared to the Rs 19.8 crore in Q2-2015 and increased 3 percent as compared to the Rs 20 crore in Q1-2016. Connection fees declined to Rs 0.70 crore in the current quarter from Rs 1.1 crore in Q2-2015 and remained flat as compared to the Rs 0.7 crore in Q1-2015.Channel carriage fees in the current quarter increased 44.9 percent to Rs 9.7 crore from Rs 6.7 crore in Q2-2015 and increased 23.8 percent from Rs 7.8 crore in the immediate trailing quarter.

     

    Let us look at the other numbers reported by Ortel

     

    Total Expenditure in Q2-2016 increased 13.3 percent to Rs 38.72 crore as compared to Rs 34.17 crore in Q2-2015 and increased 12.5 percent as compared to the Rs 34.42 crore in the immediate trailing quarter.

     

    The company’s Programming cost in the current quarter increased 7.2 percent to Rs 9.44 crore from Rs 8.81 crore in Q2-2015 and increased 5.9 percent from Rs 8.91 crore in Q1-2016.

     

    Bandwidth cost in Q2-2016 increased 19.3 percent to Rs 1.92 crore from Rs 1.61 crore in Q2-2015 and increased 7.9 percent from Rs 1.78 crore in Q1-2016.

     

    Employee Benefits Expense in the current quarter increased 45.5 percent to Rs 5.64 crore as compared to the Rs 3.88 crore in Q2-2015 and was 15.4 percent more than the Rs 4.89 crore in Q1-2016.

     

    Last quarter, Ortel announced that it had introduced free broadband option for all Ortel Cable TV subscribers in the states of Odisha, West Bengal and Chhattisgarh as a complimentary special value added service in order to target to deeper penetrate into markets by making internet affordable. Ortel says that its offer includes a free data limit every month for a year. The subscriber will be charged a nominal amount after exceeding the free data usage for the month.

  • Ortel IPO closes; goes through by a whisker

    Ortel IPO closes; goes through by a whisker

    MUMBAI: It was meant to be a test of whether investors have confidence in the media – and more specifically in India’s relatively nascent cable TV sector. And the verdict is that while retail and HNI investors don’t, institutional investors definitely do.

     

    We are referring to the Ortel Communications IPO which closed today. The regional cable TV MSO which approached the market to raise funds for its growth plans, said in a statement, quoting a Kotak Mahindra Capital spokesperson: ““The Ortel IPO has been successfully closed today. Ortel has successfully raised its entire primary capital requirement as stated in the IPO Red Herring Prospectus, along with providing partial exit to New Silk Route (NSR). The QIB segment has been fully subscribed with participation from  Mutual Funds and Insurance companies.The net under subscription in the HNI and Retail segments will reduce the offer for sale component by NSR.”

     

    Simply translated the latter part of that statement means that NSR – its private equity investor – had decided to cut back on the amount of shares it was offering to the public.

     

    At the time the IPO commenced with the price band at Rs 181-200, 12 million shares were on offer for investors. Six million of these were coming from the NSR stable, while Ortel was issuing another six million freshly. With Kotak Mahindra Capital as the issue manager, Ortel managed to rope in  Axis Mutal Fund and ICICI Prudential came in as anchor investors. Both picked up 2.55 million shares (0.9 million to Axis and 16.55 million by ICCI) for Rs 46.2 crore at the lower range of the price band.

     

    That left about 9.45 million shares on offer to qualified instituitional bodies (QIBs) and retail/HNI investors. Bids were received for 7.12 million shares of these by day three of the issue. Thus the public offer was subscribed up to 0.75 time. Overall,  9.68 million shares, including the anchor component,  were lapped up totally or 81 per cent of the issue. The QIBs totally subscribed to what was available for them.

     

    NSR, which was making a secondary sale, decided to lop off the the  shares it was selling 3.67 million, meaning only 61 per cent of its offer was subscribed. It was aiming to raise Rs 108-120 crore through the offfer.

     

    Ortel, on its part, was was looking at raising  Rs 120 crore through the fresh issue.

     

    The Kotak Mahindra spokesperson told indiantelevision.com that the retail investors don’t really understand the potential of cable TV while institutional investors do. “Hence, the QIB portion has been totally subscribed. Ortel has managed to raise all the growth capital it needs for the next two to three years,” he said. “Hence, retail investors who missed this IPO will have to opt for secondary market purchases.”

     

    Estimares are that Ortel would end up raising around Rs 175 crore crore through the IPO. But the final tally totted up to Rs 175 crore-odd, according to Press Trust of India reports.

  • By imposing digitisation, government is giving away the market to DTH: BP Rath

    By imposing digitisation, government is giving away the market to DTH: BP Rath

    When he is not actively focused on growing the business of the company, he is a family man.  He spent eight years at his current group’s parent company– Indian Metals and Ferro Alloys and then driving the group’s venture into cable and television in 1998. Currently the president and CEO of Ortel Communications, Bibhu Prasad Rath has ensured that the company not just grows, but becomes one of the big players in the country.

     

    From finance to marketing and then to the cable business, he has seen it all for the company headed by Jay Panda and Jagi Mangat Panda. By taking a cue from the US cable TV  biz, he and his team at Ortel looked at consolidating the fragmented mom-and-pop Indian cable TV industry.

     

    Rath took out some time to talk to indiantelevision.com’s Vishaka Chakrapani about Ortel’s future business plans, rollout of digitisation and the key areas of growth and development in the coming few years. Excerpts:

     

    What is the philosophy at Ortel?

     

    The core philosophy of Ortel is to have access to the consumers’ homes. We want to be a communication pipe to consumers’ homes which is capable of delivering a wide range of related services in future. To achieve this we decided right from the beginning that we would have last mile ownership, because in cable TV, video services are one way, and data is two way. Two way services are extremely sensitive to network parameters.

     

    In the traditional B2B model where the MSO reaches out to the LCO and then to the consumer, close to 80 per cent of the work is done by the LCO. The MSO does very little and so there is no quality uniformity and many times the LCO lacks the right equipment. Workmanship matters a lot in any communication network. It is a choice that we made from the beginning that we wouldn’t deal with any LCOs. Our business is B2C.

     

    Many people tell us that our model is unique. We, at Ortel, follow the international model by having a network that is capable of delivering both the services- cable and data.

     

    The biggest advantage of this model is that we can build a network and also provide data services.  The disadvantage is that because you are doing last mile, it is capex heavy. So you can’t do the kind of large spread operation that an MSO-LCO model can do.

     

    What is your reach?

     

    We are now operating in four states- Odisha, Chattisgarh, West Bengal and Andhra Pradesh. On an overall basis we have a network capacity of 800,000 homes but the subscriber base is 520,000 of which 80 per cent is concentrated in Odisha and the rest in the other states.

     

    We want to expand a lot more in other states but we haven’t been able to raise money. We look forward to raising capital in the next one year. Then our focus will be to expand in our existing and other neighbouring states such as Madhya Pradesh. Our focus is also to expand geographically to other states and more in Chattisgarh and Andhra Pradesh. Our idea is to build a regional last mile play. We do not intend to go national now.

     

    What is the status of your IPO?

     

    Right now, though the markets are improving and we hope that they continue to do so for next three to four years, we are not actively looking at it. We are looking at other means of fund raising such as private equity as well as international strategic options. The likelihood of opting for private equity is definitely higher.

     

    What has been your progress in digitisation?

     

    We have been digitising for nearly five years now, much before the mandate came in. We don’t have an under-declaration issue. We have to digitise because it enhances the capacity by getting more number of channels so that we can effectively compete with DTH operators.

     

    Odisha comes mostly in phase III and IV. Kolkata came in phase I and Vishakhapatnam (Vizag) in phase II. Our digital base is 15 per cent of our total subscribers. Analogue has always been a fixed price model. In every city you have different sections of consumers with different needs for content and different paying abilities. In digital you can offer customised products to customers. Digital is an important tool to tier the service. There are four markets in Odisha where we have been digitising- Bhubaneswar, Cuttack, Rourkela and Jharsuguda, apart from Kolkata and Raipur.

     

    Which are your key investment areas for digitisation?

     

    We are doing three kinds of investments. One is backend. We have five headends in Bhubaneswar, Jharsuguda, Rourkela, Kolkata and Raipur. We don’t intend to set up any more headends. What we are looking at now is intercity connect through infrastructure providers (IPs), mainly RailTel. Wherever we do digital we will take the feed from Bhubaneswar. At present, we give the feed to Vizag through RailTel.

     

    The next area for investment is the network. We have a fully digital network which is broadband ready so that isn’t an issue.

     

    The third cost is the set top boxes (STB). Currently we get a STB for Rs 1700. The box vendor asks for only half the amount and we pay the rest in installments, while we charge consumer only Rs 500 per box. We are looking at raising money for geographical expansion.

     

    What is your current ARPU?

     

    Our analogue ARPU is Rs 150 plus taxes, digital is about Rs 185 plus taxes and broadband is about Rs 375 plus taxes.

     

    Then we also get 15 per cent to 20 per cent incremental customers.

     

    How digitisation ready are you?

     

    In our case, SMS, encryption, billing, tiering and CAF for every digital customer and encryption, billing, and CAF for analogue customers is already in place since the past 15 years. We have a billing database where every customer’s data is entered. A collection team of nearly 700 people on contract basis go to all the neighbourhoods at the beginning of the month and collect money by providing a bill and receipt. We have a call centre where customers can lodge complaints and the locally situated service centres take care of their complaints. So the entire B2C backend is already in place.

     

    Our main challenge now is to seed the STBs. It isn’t possible to complete that by 31 December at the pace at which it’s happening right now. Our current focus is not on spread but on depth. Our biggest market is Bhubaneswar which is already 65 per cent digital. By 31 December about half of our entire subscribers should be digital.

     

    What do you have to say about TRAI’s digitisation mandate?

     

    We don’t believe digitisation is mandatory, it needs to be voluntary. When you go to smaller markets, digitisation becomes unviable. The main issue is how do you take the signal to homes? It’s either by setting up a headend or RailTel.

     

    In smaller markets the number of people is less, so the cost per person increases and becomes unviable. We have spoken to regulators that going forward, smaller markets are going to be difficult and by imposing digitisation, they are giving away the market to DTH which isn’t fair to the cable industry.

     

    We also intend to explain this to the government. They need to do a further cut off for phase III and IV, say half or quarter million population. Below these population numbers, we require either an exemption from mandatory digitisation or even longer time until the market situation stabilises and costs come down and people start getting returns to invest for digitising the less populated areas.

     

    What is your subscriber churn?

     

    We are facing around 1 per cent churn every month but on net basis it is positive. Churn happens because people shift their house to another city or maybe in the same city, some due to timings such as exam time, and I’m sure some due to bad service. On an average we also get around 500 DTH converts per month.

     

    What is the status of your broadband offering and what are your plans for the same?

     

    Broadband has been a key focus area at least at a mental level. 10 years ago, TV was the only thing in life. Now people are slowly moving to browsing and watching videos on smartphones. The TV set as a device at home is going to see a reduced utility over a period of time and internet is going to be used more. Ultimately we see this business as a broadband business and not just as a TV business. Whether this will happen in 10 or 20 years, I don’t know but it’s going to be business of broadband, not so much of analogue or digital.

     

    Out of our entire network capacity, we can give broadband to 400,000 homes. But our actual subscriber base for broadband is 11 per cent of total TV subscribers, that’s about 55,000. This 11 per cent gives 20 per cent to 22 per cent of overall revenue.

     

    Our focus is to increase broadband penetration from 11 per cent to 25 per cent.

     

    What broadband services do you offer?

     

    We are currently operating on DOCSIS 2.0. The same cable that goes to a consumer’s house is split inside for TV and for PC. We also have wired and wireless modem services for using many devices. In retail we provide speeds ranging from 512 kbps to 2 mpbs.

     

    What is your main focus now for Ortel Communications?

     

    Our main focus for the next few years will be digital and broadband. Any other service rides on broadband or digital. The only other service we have been trying to get in the past also, but it isn’t working out due to regulatory issue, is the voice service.

     

    Our aim is to go from the current subscriber base to 30,00,000 in the next three to five years.

     

    How has your growth come? Organically or through LCO acquisitions?

     

    We have acquired about 1000 LCOs since 2008. Half of our growth is organic and half is inorganic.

     

    Initially our growth was only organic and in competition with LCOs. Subsequently, since 2008, we switched to the LCO acquisition model. We acquire the LCO, dismantle the network and lay our own network.

     

    The LCO exits the business with a revenue share. We buy out the LCO with a structured payment where part of money is paid at the time of buying and the rest is given over a longer period of time ranging from 5 to 7 years. So the LCO owner gets more than what was originally committed because he gets a revenue share. The LCO’s owner does not go back and start competing with us.

     

    The key difference is that in the organic model when you are competing, you need a longer time to reach critical mass. If you are acquiring then it happens right at time of acquisition. Depending upon what works best for a situation, we follow either model.

     

    How has your revenue grown?

     

    Last year our revenue was Rs 132 crore, while this year we expect it to reach Rs 155 crore. The EBIDTA margins are usually 32 per cent to 33 per cent.

  • Ortel to focus on last mile; to expand in regional markets

    Ortel to focus on last mile; to expand in regional markets

    KOLKATA: Odisha-based multi-system operator, Ortel Communications Limited is looking at investing in expansion of its existing network as well as to new locations in the region. But it stays focused on last mile connectivity.

    The cable television service provider engaged in distribution of analogue and digital cable television services, high speed broadband services and VoIP services, plans to launch various new product lines including High Definition (HD) services to its subscribers.
    Our network is ready for digital services and we will have no difficulty in migrating to full Digital services believes Ortel CEO Bibhu Prasad Rath

    Going forward, apart from increasing its broadband subscriber base and penetration of digital services, the company is eyeing acquisition of MSOs and LMOs for expansion.

    To fund the above growth, the company is exploring various fund raising options including raising equity close to Rs 100 crore.

    Most of our markets are in phase III and IV of digitisation process. We are already active and increasing our digital penetration. Our network is ready for digital services and we will have no difficulty in migrating to full Digital services,” said Ortel CEO Bibhu Prasad Rath.

    It currently offers up to 215 digital channels. The channels on digital services are tiered to offer customers’ option to chose and pay for it.

    The pricing of our digital services is based on a differential pricing for subscribers choosing to avail different services. Currently, the monthly subscription varies from Rs 122 to Rs 305 per month including taxes. In addition to this, we also offer various genres based packages as add on as well as channels on a-la-carte basis,” added Rath.

    Ortel Communications at present has around five lakh subscribers including more than 50,000 broadband retail customers and more than 70,000 digital service users, rest being analogue service users.

    “As a conscious decision, we have preferred the depth model with focus on a given geographical market, control of last mile and full retention of subscription revenue. A major part of our revenue comes from subscriptions and we are comparatively less dependent on carriage fee,” he concluded.

    The business of Ortel is focused in the states of Odisha, Chhatisgarh, Andhra Pradesh and West Bengal. While the network is operational in 39 locations and the services are offered in 53 towns with more than 25,000 kilometers of cables, 35 analogue head ends and six digital head ends.