Siti Cable - Rapid Digitization

Management plans to scale up its presence in existing and new markets and digitise its total subscriber base over the next two years. Management thinks there is plenty of headroom for digital subscription (44% of FY14 consolidated revenue) growth on (1) c.20% further ARPU growth in digitised cities and (2) conversion of its analog subscribers (c.6mn subscribers with ARPU of less than INR 10/month) to digital (average ARPU of INR 100).

The company recently launched broadband in Kolkata with c.100mbps broadband speed and plans to do a similar launch in NCR in August 2014. It is targeting 10% of the digital subscriber base to migrate to broadband connection with an average ARPU of INR 500 (as per the company the average ARPU for Siti’s
existing broadband subs in Kolkata is INR 400).

Management expects MSOs to retain their market share in Phase 3 from DTH operators (they had earlier retained their market share in Phase 1-2 digitisation from DTH operators). This could likely lead to lower subscriber additions for other DTH operators like Dish (Underperform; PT: INR 47) in Phase 3.

In India, STBs are provided to customers at a subsidised price. Siti treats the upfront activation amount paid by customers as activation revenues in the quarter of STB deployment. The STB is capitalised and depreciated over eight years.