The ongoing Phase III of the country’s cable digitization is expected to result in significant revenue gains for Odisha-based Ortel Communications.
That’s the takeaway of a conversation with Bibhu Prasad, President and CEO of the company.
In an interview with CNBC-TV18, Prasad said the company is staring at a major opportunity arising from the conversion of its customers, three-fourths of whom still use the analog network.
"As of June 30, around 25 percent of the subscriber base was digitised and the remaining were on analog," he said.
Ortel is is engaged in the distribution of analog and digital cable television services, broadband and VOIP services. The company has its major subscriber base in Odisha – 90 percent of it 5.42 lakh customer base is from the state – and also has minor presence in Chhattisgarh, Andhra Pradesh & West Bengal.
The government has mandated the completion of Phase III conversion of analog cable services into digital by December 31 this year.
Under this, 221 cities from all 30 districts of Odisha are currently undergoing the digitisation process.
Analysts believe conversion of analog to digital results in significant gains for cable operators as it helps plug revenue leakages.
“Ortel’s average revenue per user (ARPU) stands at Rs 185 for digital and about Rs 400 for broadband,” Prasad said, adding that this is expected to stabilize at Rs 200 for digital and Rs 400 for broadband after the digitisation process.Below is the verbatim transcript of the interview. Mangalam: Could you give us a sense of what is the improvement in your subscriber base that you are seeing once the digitisation kicks in, what is the current ratio of your subscribers which are digitised already and what is the upside that you see for Ortel Communications once the digitisation sets in?
A: First of all, Q2 results are two weeks away from today. So I will not be able to comment on Q2 numbers and whatever comments I make, it will be based on Q1 numbers. So, as on June 30, around 25 percent of my subscriber base was digitised and the balance was on analogue and as far as the upside is concerned, we are in process to complete the digitisation by December 31. However, the bigger upside for us is coming from expanding the subscriber base per se than converting analogue to digital.
Reema: Give us some sense. By December 31, all 100 percent of your existing subscribers versus the current 25 percent would be digitised and secondly, what is the kind of growth rate that you are expecting in subscriber additions?
A: As I mentioned, we are ready and in a position to complete the digitisation by whichever date is decided by the government of India - currently December 31.
On growth rate, as on March 31, 2015, my total subscriber was 5,30,000 that is a combination of analogue, digital and broadband and we are working on a target of achieving one million subscribers by March 2017 and we are on track for that.
Mangalam: In that case, by the end of this year or by the end of 2015 once everyone is digitised could you give us a sense of what your average revenue per user (ARPU) will be as far as your cable business is concerned and what your earnings before interest, taxes, depreciation and amortization (EBITDA) margins will be?
A: My current digital ARPU is Rs 185.
Mangalam: I am talking on a blended basis.
A: Only digital.
Mangalam: So, by 2015, what will your ARPU be?
A: Digital ARPU is Rs 185, broadband ARPU is close to Rs 400. So, as far as the ARPU is concerned, both digital and broadband, I do not see any significant change in ARPU. So, it may stabilise at around Rs 200 for digital and Rs 400 for broadband. But what I see is the subscriber growth which is the biggest growth driver -- as I said, we are talking of taking half a million to one million. So, I do not see any significant changes in ARPU but I do see significant improvement in the subscriber number.
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