Cable operators to post strong revenue growth than DTH companies

Cable companies, or multi-speciality operators, are expected to record better revenue growth than direct-to-home companies in the next two fiscal years. A rise in revenues across the value chain, low leverage and strong capital base will help cable operators post strong revenue growth in the next few quarters.

The next two phases of digitisation provide a good opportunity for cable and DTH companies to digitise many subscribers. The next two phases will cover 78 million subscribers, compared with 21 million in the last two phases.

However, cable companies are better placed to digitise more subscribers than their DTH counterparts, given the availability of capital on their books. Den Networks recently raised $110 million through a preferential allotment to Goldman Sachs, while Hathway Cable & Datacom raised money through an IPO in 2010. Den Networks operates in 150 cities and Hathway in 140 cities.
Thanks to this wide coverage, cable companies are adding 9-10 lakh digital subscribers every quarter while DTH companies are adding close to 2 lakh. Besides, the set top boxes offered by cable companies are cheaper than those with DTH companies and this helps them retain their subscriber base.

Even after factoring in the impact of a depreciating rupee, which adds to the cost of set top boxes, cable companies price their boxes at Rs 800-1,000 apiece. In contrast, DTH set top boxes are priced at Rs 1,800-2,000.

In Mumbai and Delhi, cable companies are retaining 45-55% of the average revenue per user, or ARPU, according to IDFC Research. The average revenue per user in the first two phases of digitisation, which include metros and cities with a population of over a lakh will be higher than those in the next two phases of digitisation.