Hathway - Robust subscription, carriage fees; surge in content cost

Hathway’s net realisation per subscriber in Mumbai and Delhi remained unchanged QoQ at INR85 (inclusive of service tax). Subscription revenue jumped ~32% QoQ in Q2FY14 largely due to higher income from Kolkata and Phase 2 cities. Though content costs surged a massive ~75% YoY in  Q2FY14, further increase in H2FY14 will be limited in existing cities as most content deals have been inked.

Currently, Hathway’s total digital subscriber base stands at ~7.7mn, while at Q2FY14 end it was ~7.6mn. The consolidated entity seeded ~0.4mn boxes in Q2FY14. With ~0.8mn boxes in inventory, the company is looking to aggressively seed boxes in Phase 3 cities in H2FY14.

Hathway is one of the best placed MSOs to capitalise on the huge digitisation opportunity.  Compared to DEN, Hathway has a sizeable primary subscriber base, well-entrenched broadband operations and has seeded the highest boxes amongst MSOs. However, commencement of gross billing in Mumbai and Delhi is a key monitorable.