Mr. Sudhir Agarwal, CEO, Wire and Wireless (India) Ltd.
“With digitisation, we would have clarity on subscribers. Once that happens, under-reporting will diminish.”
Wire and Wireless (India) Limited is one of India's largest Multi System Operator (MSO). With 53 analogue and 11 digital head ends and a captive network of more than 12,000 Kms, it provides its cable services in India's 54 key cities and adjoining areas, reaching out to 10 million households. Wire and Wireless (India) Limited is a part of the Essel Group, which is one of India's leading business houses with a diverse portfolio of assets in media, packaging, entertainment, technology-enabled services, infrastructure development and education. WWIL product range includes, Analogue Cable, Digital Cable Television, Broadband and Local Television Channels. It has been providing services in analogue and digital mode, armed with technical capability to provide features like Video on Demand, Pay per View, Electronic programming Guide (EPG) and gaming through a Set Top Box (STB). All products are marketed under SITI brand.
In an exclusive interaction with Hemant P. Maradia of IIFL, Mr. Agarwal says: “With digitisation, we would have clarity on subscribers. Once that happens, under-reporting will diminish.”
Take us through your Q2 FY12 results?
We had an impressive second quarter in terms of our financial results. Revenues were up 27% Year-on-Year. In absolute terms, there was a growth of Rs 204mn.
We also delivered strong growth in operating profit.
The performance was driven by all our revenue streams. Our carriage revenues grew by 27% YoY in Q2 FY12. Advertising revenues were up 22% YoY. Subscription income was up 12% YoY.
As a result, our EBITDA in the second quarter surged by 135% YoY.
We are confident that the positive momentum will continue to drive WWIL’s growth for the remainder of the fiscal year 2011-12.
We are showing positive results at the operating profit level for the last 6-7 quarters now. The bottomline (PAT) is down because of high interest costs.
We decided to expend our geographic footprint strategically into some parts of East India, North India and South India. We intend to continue these strategic expansions.
What is your reaction to the Union Cabinet’s decision approving the ordinance for the digitisation of cable television distribution in the country?
We are waiting for the ordinance to come out. The Union Cabinet has made the announcement but the document has not been released so far. As soon as that comes, we will know exactly what the situation is.
Having said that, we welcome the Cabinet decision. My belief is that the move by the Cabinet will be an inflexion point for the cable television industry.
What impact this move will have on the cable television industry in India and particularly for big MSOs like WWIL?
WWIL is the direct beneficiary of the Cabinet decision on digitisation. Currently, the industry is widely affected by under-reporting and lack of transparency in subscription growth. With digitisation, we would have clarity on subscribers. Once we have a clear line of sight with the consumers under-reporting will diminish. That in turn will boost our subscription income.
Are you in the state of readiness for digitisation?
You must take note of a couple of things. One, digitisation of cable television will happen in four phases. It must be completed till December 2014. This is presuming that the ordinance will endorse the schedule prescribed by TRAI.
The first phase will cover the four metro cities. We are present in three metros right now.
Technologically, we have been preparing ourselves ever since TRAI recommended digitisation. So, we are well prepared. In fact, WWIL is one of the best prepared companies for cable television digitisation.
Digitisation doesn’t just mean putting set top boxes in every cable television home. Lot of work needs to happen in terms of back-end, technology, systems, processes, etc. This is precisely what we have been doing for last few quarters building on infrastructure and backend system & processes.
In our CAS areas and non-CAS areas, we have ensured full 360 degree process for migrating to digitisation. So, we are in a very good shape to take off.
How will the consumers benefit from the rising digitisation of cable television distribution?
The biggest benefit for consumers would be a great viewing experience in terms of the picture quality, sound, etc. Because of digitisation, they will get access to a number of value-added-services (VAS), which is not available to them currently.
Customers will be empowered to choose as to what they want to watch. They can subscribe to only those channels they wish to watch and pay accordingly. They will enjoy true freedom of choice.
Besides, in cable television there is no issue of spectrum. So, we can increase the number of channels we offer to our customers. We can go up to 700-800 channels.
We will also have the advantage of return path.
Is there scope for more consolidation in the MSO space?
Oh sure, lot of consolidation would take place as we go forward. Investment requirement is huge. Over the next 4-5 years, the investment required to implement nation-wide digitisation is to the tune of ~US$5bn. Because of this, smaller players would merge with larger entities.
We are very excited about this. WWIL is well positioned to take advantage of the digitisation opportunity.
How do you intend to make up for the potential loss of carriage and placement revenues from the broadcasters?
My belief is there would be some impact on carriage but placement would continue. And, whatever negative impact is there on carriage would be compensated by the increase in subscription revenues. Because of transparency, 100% subscribers will come on board.
In the first full year of cable television digitisation, we see a jump of 40-50% in our subscriber income. There will be 8X to 10X growth in subscription revenues over the next 4-5 years, according to industry estimates.
Besides subscription, VAS could add a big chunk of revenue.
How do the MSOs intend to take on the DTH players?
India is a huge market; my belief is there is enough space for both the technologies to co-exist and grow. There are inherent advantages and disadvantages in both the platforms.
One advantage that cable will have is its capability to provide broadband internet services due to return path. Right now, broadband penetration in India is very small. If you notice, the telecom sector has 70-75% penetration in the country. So, there will be an explosion in the broadband space.
Cable will continue to have advantage on spectrum too.
What are the plans for Broadband Internet?
In the last few months, we have started our broadband business with a combination of wired and wireless technology. We have been pretty successful so far. We started in the East. We have connected 30 plus towns in West Bengal.
It is an extremely capital efficient technology since it is wireless. It is very quick to roll out.
What impact will digitisation have on your cable television ARPUs in the long term?
Our ARPU in broadband is approx Rs 500+
In analogue, the ARPU varies between Rs 100 to Rs 125. In digital, it is Rs 150.
With digitisation happening, I see ARPU going up to Rs 200-250 in cable television.
Have you completed cost reduction and resource optimization measures?
We have been ruthless on cost reduction and resource optimization. We have critically examined all components of costs.
It is a continuous process for us. Also, we are not reckless with our spending.
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