Hathway Digital & Broadband Subscriber Reach 7 Mn

Total digital subscribers are currently ~6.2mn for Hathway. The company added ~2.4mn subscribers in phase 1, ~3.3mn in Phase 2 and ~0.5mn in Phase 3 (adjoining parts of Phase 1 and 2, but officially part of phase 3). Of the 6.2mn subscribers, ~0.6mn are primary while the balance are secondary subscribers. Hathway seeded ~3mn boxes in FY13. Hathway’s subscription revenue increased by INR170mn YoY in FY13. The number was similar at the consolidated level as consolidated numbers include only nine month numbers of GTPL. Subscription revenues will start kicking in from next quarter, which would aid profits. Hathway has entered several new cities in some states where it has strong presence. The company has also strengthened its position in cities like Faridabad, Allahabad, Bengaluru, etc. Phase 3 seeding in a major way will start from Q4FY14. The company is looking to increase its presence in West Bengal, Maharashtra and Andhra Pradesh during Phase 3. Over 1mn boxes of inventory. Hathway’s broadband subscriber base remains at ~0.416mn. Its broadband ARPU is INR300. Mumbai, Pune, Bengaluru and Hyderabad are important cities where the company is looking to improve its technology, which will help increase ARPUs.

TRAI's standard tariff order not a game changer

TRAI has issued a tariff order, prescribing standard tariffs for set-top boxes (STB) for digital cable and DTH subscribers. This specifies security deposit of `400-800 (refundable after three years) and monthly rent of `33-56 for cable TV subscribers for three years. For DTH subscribers, deposit and monthly rent is set at `500-1000 and `43-71, respectively. Besides, MSOs and DTH operators can offer additional tariff plans. They currently charge ~`2000 (non-refundable) for STB activation and no monthly rent. Current value of rent under standard tariffs is equivalent to these realizations. However, we find standard tariffs unattractive due to: (1) Lower upfront collections; (2) risk of default on rent, as subscriber churn rates in DTH are ~10% p.a; and (3) no protection from any increase in STB costs and INR depreciation Impact of the tariff order on DTH companies would depend on actual uptake of STB under the standard tariffs. We expect limited uptake due to likelihood of: (1) Lower promotion of standard plans; (2) customer resistance to monthly rents; and (3) unavailability of additional features under standard plans (recording facility, HD). They currently charge `800-1000 to end users (no rent); its realization is `500-800 after LCO commissions. These tariffs leave limited arbitrage vis-à-vis standard tariff plan.