Investor Presentation December 2011 - Hathwayhathway.com/assets/InvFile/1326269409CRF.pdf ·...

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Hathway Cable & Datacom Limited Investor Presentation – December 2011

BSE : 533162 | NSE : HATHWAY | Bloomberg : HATH:IN | Reuters : HAWY.NS

www.hathway.com

Cable TV | Broadband

Safe Harbor

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The information contained in this presentation is only current as of its date. All actions and statements made herein or otherwise shall

be subject to the applicable laws and regulations as amended from time to time. There is no representation that all information

relating to the context has been taken care off in the presentation and neither we undertake any obligation as to the regular updating

of the information as a result of new information, future events or otherwise. We will accept no liability whatsoever for any loss arising

directly or indirectly from the use of, reliance of any information contained in this presentation or for any omission of the information.

The information shall not be distributed or used by any person or entity in any jurisdiction or countries were such distribution or use

would be contrary to the applicable laws or Regulations. It is advised that prior to acting upon this presentation independent

consultation / advise may be obtained and necessary due diligence, investigation etc may be done at your end. You may also contact

us directly for any questions or clarifications at our end. This presentation contain certain statements of future expectations and other

forward-looking statements, including those relating to our general business plans and strategy, our future financial condition and

growth prospects, and future developments in our industry and our competitive and regulatory environment. In addition to statements

which are forward looking by reason of context, the words ‗may, will, should, expects, plans, intends, anticipates, believes, estimates,

predicts, potential or continue and similar expressions identify forward looking statements. Actual results, performances or events may

differ materially from these forward-looking statements including the plans, objectives, expectations, estimates and intentions

expressed in forward looking statements due to a number of factors, including without limitation future changes or developments in

our business, our competitive environment, telecommunications technology and application, and political, economic, legal and social

conditions in India. It is cautioned that the foregoing list is not exhaustive This presentation is not being used in connection with any

invitation of an offer or an offer of securities and should not be used as a basis for any investment decision

India Opportunity for Cable TV

3


Cable TV : The Opportunity for addressability (Digitization)

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Source : MPA 2011

Indian Population : 1.2 Billion (239 Million House)

TV Households (147 Million)

Pay TV (127 Million) Others (20 Million)

DTH (32 Million)

Analogue

(89 Million) Digital Cable

(6 Million)


2015 : World’s 2nd largest Cable TV Market

5

Source : MPA 2011

Sub

s in

Mill

ion

72% 76%

81% 86% 90% 92% 94% 95%

91 102

114 127

139 149 158 166

0%

20%

40%

60%

80%

100%

-

50

100

150

200

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Pay-TV Penetration (% of TV HHs) Pay TV Subs

Sub

s in

Mill

ion

Sub

s in

Mill

ion

216 223 231 239 246 254 261 268

127 134 141 148 155 162 169 175

55%

60%

65%

70%

-

100

200

300

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Total Household TV Household %

83 88 91 94 97 99 101 102

8 15 23 32

41 50 57 64

0

50

100

150

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Cable / Digital TV DTH


Digitization Time Line of MIB

6

Phase I

4 Metro: Delhi Mumbai Kolkata

Chennai (Cumulative

Population : 36 Mn **) : June-12

Phase II

All 1 Mn + Cities : (Cumulative

population : 70 Mn **) : Mar-13

Phase III

All Urban areas (Municipal

Corps/ Municipalities)

Sep-14

Phase IV

Rest of India : Dec-14

Sunset date for analog cable across India : Dec-14

Source : MIB notification dated : 11th November 2011


Mandatory Digitization – Finally to be a reality, soon!

7

● Digitization initiated in 2003

– Chennai digitized in 2003, southern parts of Mumbai, Delhi &

Kolkata digitized from 2007 onwards

● Failed for 7 years due to

– LCO unwillingness, weaker MSOs and broadcasters

revenue model being ad dependent

● Mandatory Digitization to be a reality soon

– Consumer demands better TV viewing experience

– LCOs forthcoming now because of real threat of DTH

– MSOs have grown in size through inorganic route and

raised funds through IPO, fund-raising for digitization

now possible

– Top 5 MSOs together pass through more than ~50% of the

analogue HHs

– Broadcasters Ad growth is stabilizing, focus on subscription

revenues as reach is established

● Favorable regulatory environment

Cable TV | Broadband 8

Source : TRAI

Regulatory Impetus now provided…

DAS : Favorable regulatory environment…..

Increased Foreign

Investment

Recommended

increase in foreign

investment limit from

49% to 74% for MSOs

going digital

* MSO/LCOs to be eligible for seeking Right of Way on a non-exclusive basis for

laying optical fibre / cable network. Process of laying intra-city cable inrastructure

would become easier

Several recommendations & Incentives for Cable Companies to Promote Digitization

Others

* Supreme Court‘s interim order has capped content cost in digital platforms at 42% of

analogue platforms

* Recommended Income Tax Holiday till 31st March 2019 for companies that invest in

DAS

* TRAI has recommended waiver of Duties on Digital Headend Equipment & STB


Cable seen as the largest broadband delivery platform

9

Source : TRAI

• India's government plans to invest more than US$13bn to bring fixed-line broadband services

• The National Broadband Plan - submitted by the (TRAI) to the Department of Telecommunications (DoT) in

December—recommends a government investment of about Rs600bn (US$13bn) in a national open-access core fibre

network reaching all villages with a population of more than 500 people. Its target is to connect around 160m of India's

275m households to broadband services by the end of 2014.

• By the end of 2013, the TRAI expects network construction to be entirely finished. By the end of 2012, it is aiming for 75m

connections, and it wants this number to rise to 160m two years later, with 40% of connections based on wireless

broadband technology. At a cost of around US$11bn in rural areas and US$2bn in cities, the network is expected to

provide at least 10Mbps services to 63 cities, 4Mbps services to another 352 cities and a basic 2Mbps service to every

town and village with more than 500 inhabitants.

• TRAI Plan envisages the use of various technologies, with fibre-to-the-home (FTTH) and fibre-to-the-curb (FTTC)

expected to be dominant in cities and wireless technologies like EV-DO, Wi Max, HSPA and LTE deployed elsewhere.

• TRAI plans to build the network through a new government-owned holding company called the National Optical Fibre

Agency (NOFA). NOFA will be responsible for planning, building, operating and maintaining the network the country's

largest urban areas. A State Optical Fibre Agency (SOFA) in each state is to assume responsibility for the network outside of the JNURM cities.

TRAI announces National Broadband Plan –

10

DAS has higher capacity (> 1k Channels)

Drive C&P

Lower SAC (Rs.1,575 Vs Rs.~2,800 for Dish TV)

No rainfall attenuation

Quick & Localized customers

services

Lower Marketing spends

DTH : 10% licenses fees

+ 5% Transponder costs

Bundling with Broadband

(Triple Play Opportunity)

Localized content

VOD Vs NVOD

Inter active services

Better branding by DTH

No territorial limitation

-scale advantage goes to DTH

DTH : 100 % Prepaid Model

Cable : Dependent on LCO for last mile

Well capitalized

– DTH players can be aggressive

Vertically integrated giants

– unfair competition

(Tatasky/Dish Tv/ Sun TV)

Synergy from other Business (Airtel / VideoconD2H / Reliance TV )

DAS : Relative SWOT over DTH



Cable - the dominant and superior platform in India

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• Current cable infrastructure can offer more channels in digital format

• Ability to offer VAS like VOD, PPV & HD Service Higher bandwidth / channel capacity

• No regulation prohibiting unique content from individual headends

Ability to offer regionally customised content

• Broadband over same cable infrastructure – not possible in DTH Potential for broadband cable services

• Quick response time Local on-the-ground customer service

• DTH suffers from poor signal quality in adverse weather conditions Consistent signal quality

• License fee, transponder cost and higher subscriber acquisition costs passed on to consumers Higher cost base for DTH

Hathway Cable & Datacom Limited

12


Hathway’s National Foot Print positions it best

13

Note: C&S – Cable & Satellite

Company Background Promoted by the Raheja Group & News Corp.

Leading cable TV services provider • Reach to c.8.7 million cable homes

• Delivers services in 140 towns and cities with

leading presence in key geographies

• Largest cable operator in India by paying

subscriber – C.1.8 million

• Largest provider of digital video

service – C.1.7 million subscribers

Leading cable broadband services provider • c.1.4 million two-way enabled homes passed

•Highest market share (47%) with 392K subscribers

20 Digital HE’s positions Hathway well

Award winning customer service • Named ―Best MSO‖ by Indian Telly Awards 7 times • Star News Brand Excellence Awards for Digital Products and Internet Services

* FY12 Q2 Numbers are unaudited consolidated numbers


Investment in new technologies

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Wide HE’s spread to provide quality service all

round India 71 Analog and 20 Digital Head-Ends in all

15,000 kms of HFC

1.4 million broadband enabled Homes

New Ericsson Head-end / Compression

Ericsson Technology to help increase

channel network capacity

1st National MSO to launch HD services

HD services to enhance customer viewing


Our Existing Infrastructure allows ease of expansion

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● Presence in 140 key towns and cities, including

the top markets for advertisers and broadcasters

Partnerships with global vendors – Cisco,Ericsson,

NDS, CommScope, Humax, Incognito, Skyworth

Cable network largely digital ready – only capex on

seeding STB

● Two way enabled network capabilities provides a

path to extend reach of broadband services

c.1.4 million cable homes already broadband

enabled

Cable plant has adequate spectrum for broadband

growth requirement

Minimal incremental capex for upgrading to 2-way

Market leading presence in cable distribution in

key geographies

Growing broadband network over existing cable

infrastructure



Supported by superior back end systems & Services

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Technology Partners

STB vendor Humax

STB vendor Skyworth

Conditional Access Vendor NDS

Head-end / Compression Ericsson

Head-end / Compression Scientific Atlanta

Server Sun Server

Back end & Hardware Support CISCO

ERP Oracle

Call Centre Intelenet

SMS Magna Quest Magna Quest

http://www.humaxdigital.com/global/


Hathway has been at the leading edge of cable industry in India

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1998- 2002 2004-2008 2009-2011

• 1998 : The Promoters acquired

100% stake.

•2000 :

•News Corp acquired a

26% equity interest

• Started Providing

Broadband services on

DOCSIS Technology

•2002 : Acquired 200,000 direct

cable television subscribers

during the two years

•2004 : Launched digital cable service

& Reached 100,000 broadband

subscribers

• 2007 : Chrys Capital acquired a 15%

equity interest in Company

• 2008 : • Kaup Capital, MSPI & Arcadia

Invested in Compulsorily Convertible

debentures

•Acquired 51% equity interest in

Hathway Bhaskar Multinet Pvt. Ltd In

Madhya Pradesh

•Acquired 50% equity interest in a large

independent MSO in Gujarat

• Acquired two major MSOs in

Maharashtra

• 2009 : •First MSO to launch DVR Service In India

• Morgan Stanley, Kaup Capital & Arcadia

invest Rs. 2.4bn in FCCDs to be converted to

equity at a later date

•Reached ~ 320,000 broadband subscribers

• Reached one million digital cable

television subscribers

• 2010 : The Company raised Rs. 4.8 bn

through IPO in Feb 2010

•2011 : 1st National MSO to launch HD services

Hathway’s Upside Triggers

HD

Broadband

VAS

Tiering

Objective to increase ARPU by 45% end of phase II

Specialty

Channels (Like. Food, Travelling,

Fashion, Educational

etc.)

Bundling with Cable TV

with Average ARPU of

Rs.500 per Month

Started HD Services in Mumbai, Pune, Delhi, Hyderabad, &

Bangalore

Bundled Services

offered to Hathway

Subscribers

Cable TV | Broadband 18

Rs.50 Additional ARPU through VAS services

VOD Negotiating with Films Libraries

Value added service upside


Hathway‘s HD Offers

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Hathway‘s Broadband Offers

20


Clear Strategy to maintain leadership

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Increase depth :

Acquire last mile to enlarge

paying subs

Digitizing & cross-selling:

Digitize the universe & cross-sell

broadband services

Expand Width :

Enlarge the home reached base

through expansion of foot print


Sub

s (‗0

00)

Sub

s (‗0

00)

Su

bs

(‘00

0)

-

2,000

4,000

6,000

8,000

FY07 FY12 Q2

4,728

8,655

Homes reached (Cable)

1.8 X

-

500

1,000

1,500

FY07 FY12 Q2

770

1,835

Total paying subs

2.4X

-

250

500

750

1,000

1,250

FY07 FY12 Q2

281

1,703

124

392

Total digital Subs Broadband Subs

5.5X


Robust track record of consolidation

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● Track record of growth through consolidation

Since inception successfully identified, acquired and integrated several MSOs and LCOs

Robust acquisition framework

Target identification

● Growth, asset quality, distribution

network and operational efficiency

● Incremental reach to garner higher

placement revenue

Partnership vs. Acquisition

● Retain management - leverage on the

ground intelligence

● Management retains minority interest –

helps align long-term interests

Upgrade network

● Upgrade "last mile" to improve analog

product quality

● Offer digital services

● Two-way enable network to introduce

broadband services

Enhance service quality

● Train LCOs - improve familiarity with

services and procedures

● Ensure uniformity in service quality and

enhance the Hathway brand


Leading the digitization of cable in India – C.1.7 million Digital homes

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Customer advantages

● Superior customer experience

● Customised local content

● Expanded channel offering

● VAS (EPG, PVR, NVOD, PPV)

Hathway advantages

● Enhanced customer stickiness

● ARPU enhancement

● Eliminates revenue leakage / under-

reporting

6.1x growth in digitizing the network

Hathway is the largest distributor of digital cable services


92

1,463

189

240

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

FY07 FY12 Q2

Sub

s ('

00

0) Mandatory Digital

Voluntary Digital

281

1,703

CAGR : 57% 6.1x


Dominating market presence in cable broadband

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Competitive advantages

● Minimal incremental Capex which is

further declining

● Better ARPU and EBITDA margins

● Enhance customer relationship

Multi-pronged growth strategy

● Cross-sell to cable universe through

new homes passes

● Expand geographic footprint

● Attractive and cost-effective offering

4.1x growth in broadband subscribers

Maintained c.27% penetration while growing homes passed significantly


Su

bs (

‘00

0)


Performance Indicators – Operating Metrics

25

Leading Operator in Several Key Market #1 Cable Broadband

Cable Home Reached 8.7 Million

Broadband Homepass 1.4 Million


-

500

1,000

1,500

2,000

2,500

Paying CATV Subscribers Broadband Subscribers Total RGU

FY2007 770 124 894

FY12 Q2 1,835 392 2,227

770

124

894

1,835

392

2,227

Sub

s (0

00

s)

2.5x Growth in RGUs


Financial Performance

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CAGR (FY07-11)

Cable 33%

Broadband 23%

Overall 31%

• Strong growth momentum across Cable & Broadband

• 2.9x growth in revenues over FY07-11

• EBITDA growth from FY09 as Strategy bearing fruit

• Key operational expenses declining with economies of Scale

` M

n

` M

n

Income

222 213

1,037 1,327 1778

7%

5%

15%

18%

20%

0%

5%

10%

15%

20%

25%

0

200

400

600

800

1000

1200

1400

1600

1800

2000

FY07 FY08 FY09 FY10 FY11

EBITDA

EBITDA Margin

-

2,000

4,000

6,000

8,000

FY07 FY08 FY09 FY10 FY11

2,288

3,222

5,357 5,775

7,242

552 733 1,055 1,254 1,263

246 391 320 367 315

Cable Broadband Other Operating Income


Consolidated Latest results

27

Rs. In Million

Key Operating & Financial Metrics Units FY09 FY10 FY11

Operating Metrics

Paying Cable TV Subscribers (000s) 1,624 1,640 1,815

Paying Broadband Subscribers (000s) 341 332 375

Total Revenue Generating Unit - RGU (000s) 1,965 1,972 2,190

Total Digital Subscribers (000s) 1,008 1,033 1,466

Financial Metrics

Cable TV Rs. In Million 5,357 5,775 7,242

Broadband Rs. In Million 1,055 1,254 1,263

Other Operating Revenue Rs. In Million 222 299 315

Operating Revenue Rs. In Million 6,634 7,328 8,821

Operating EBITDA Rs. In Million 956 1,259 1,538

Operating EBITDA Margin % 14% 17% 17%

Non Operating Revenue Rs. In Million 98 68 241

EBITDA (Incl. Non Optg Rev) Rs. In Million 1,054 1,327 1,778

EBITDA Margin % 16% 18% 20%


Standalone Latest results

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Rs. In Million

Hathway Cable & Datacom Limited FY12 Q2 FY12 Q1 H1 FY12 H1 FY11

Income

Income from Operations 1,275.0 1,205.6 2,480.6 2,246.2

Other Operating Income 10.2 19.5 29.8 52.6

Total 1,285.2 1,225.2 2,510.4 2,298.8

Expenditure

Employees cost 104.1 104.4 208.5 199.1

Pay Channel Cost 345.6 347.5 693.0 559.5

Operational expenditure 325.9 262.1 588.0 479.4

Administrative expenditure 291.4 319.7 611.1 563.7

Total Expenditure 1,066.9 1,033.6 2,100.6 1,801.7

EBITDA before Other Income 218.3 191.5 409.8 497.2

EBITDA before Other Income Margin % 17% 16% 16% 22%

Other Income 22.6 52.2 74.8 93.6

EBITDA After Other Income 240.8 243.8 484.6 590.8

EBITDA After Other Income Margin% 19% 20% 19% 26%

Depreciation / Amortisation / Impairment 252.1 265.0 517.1 466.4

Interest 87.1 96.0 183.1 192.7

Exceptional Items (1.3) 30.7 29.4 28.6

Prior Period Adjustment 6.2 0.1 6.2 2.0

PAT (103.2) (148.0) (251.2) (98.9)


Experienced Board

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Bharat Shah – Chairman & Independent Director

Rajan Raheja – Director

Akshay Raheja – Promoter & Director

Viren Raheja – Promoter & Director

K Jayaraman – Managing Director & CEO

Uday Shankar – Director {Nominee of News Corp. (Star)}

Vinayak Aggarwal – Director

Hursh Shrivastava – Director {Nominee of News Corp. (Star)}

Brahmal Vasudevan – Independent director

Sasha Mirchandani – Independent director

Sridhar Gorthi – Independent director

Devendra Shrotri – Independent director


Experienced management team

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K. Jayaraman - CEO & MD : Jayaraman has over twelve years of experience in the Cable TV industry. He has been with Rajan Raheja Group since 1993 i.e; for the last 18 years. For

the first three years he was actively involved as board member following which, in March 1998, he took over as the CEO of Hathway. He has held various positions including that of

Head of Finance in Johnson Tiles. Prior to joining the Group he was with ICICI and Citicorp. He is a Chartered Accountant by profession.

G. Subramanian – CFO : GS has over 29 years experience as a senior finance professional in the Telecoms, Media & Infrastructure sectors. He has in his career worked with L&T,

The RPG Group, BPL Mobile Communications, Star TV & The Times Group.

Milind Karnik - President – Operations & Company Secretary : Milind joined Hathway in 1998. He started his career with audit firms R.S.M & Co and A. F. Ferguson as a Senior

Auditor. He has also worked in Hoechst India, Citigroup, Birla Marlin Securities and Caspian Broking, and has deep experience across finance and legal areas. Milind is a Chartered

Accountant, Company Secretary and a Cost Accountant . He holds a Bachelors Degree in General Law

D. Mahadevan - EVP- Finance : He has 22 years of experience in accounting and finance, and has worked extensively in arranging for funds from both national & nternational banks

& financial institutions. He has worked with Orkay Industries Limited, H & R Johnson India Limited and Shaw Wallace Limited before joining our Company. Mr. Mahadevan is a

Chartered Accountant and holds a Bachelors Degree in Commerce from Mumbai University. He also underwent the Senior Management programme for management development

conducted by the Indian Institute of Management, Ahmedabad in the year 2000.

Roshan D'souza - President – Broadband : Roshan has 16 years of cross functional experience in the technology space. He is a Electronics Engineer and holds a Masters degree in

Management. Having worked for both Indian and MNC, his last assignment was with Cisco Systems India (P) Ltd. where he held the position of VP-Service Provider Business.

Rajesh Brid - VP – IT, Systems & NOC: Rajesh joined Hathway in 2002. He has worked with various leading MNCs in India like Boehringer Mannhiem, Mirc Electronics (Onida), E.I.

DuPont and General Motors in their IT department. He holds a Bachelors degree in Engineering (Computers) and a Diploma in Financial Management

Rajeev Pareek - EVP- Marketing : Rajeev joined Hathway in 1999 and has over 19 years of experience in the Media Industry. Prior to joining Hathway, he was with IndusInd Media &

Communications in their marketing division. He has successfully handled projects, credit control, collections and product management functions; involved in successful launch of the

maiden print product of Hathway. Rajeev holds a Masters Degree in Management Studies and a Bachelors Degree in Science

Glenn Pinto - VP – HR & Administration : Glenn joined Hathway in 2001 and has worked with various leading companies like Burroughs Wellcome India (now known as Glaxo

Wellcome), Eicher Goodearth, Elf Lubricants, Eureka Forbes, Golden Tobacco & Godrej Soaps. He holds a Masters Degree in Personnel Management from the Symbiosis Institute of

Business Management, Pune. Glenn also holds a Diploma in Personnel Management from Xavier Institute of Management, Mumbai

Bhavik Palan - EVP – Legal & Regulatory : Bhavik has been a legal consultant to Reliance Industries Limited for the last ten years and has joined Hathway in 2008. A solicitor by

profession, he commenced his career with M/s Kanga & Co, Advocates and Solicitors and has practiced as a solicitor with Atul .S. Dayal & Associates. His key areas of practice are

civil litigation and conveyancing. He is responsible for all litigation for and against the company including Regulatory and Civil Litigation and Arbitration as well as guiding all the Legal

documentation of and for the company.


Shareholding pattern as of Q2FY12

31

Promoters:

Raheja group 49.53%

News corp. 17.30%

67%

5%

13%

16%

Promoter FII DII Others

3

2

Thank you

Hathway Cable & Datacom Limited Registered Office at ‘Rahejas’, 4th Floor,

Corner of Main Avenue & V.P.Road,

Santacruz West, Mumbai 400054

www.hathway.com

Investor Presentation December 2011 - Hathwayhathway.com/assets/InvFile/1326269409CRF.pdf ·...

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