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Hathway Cable and
Datacom Ltd.
Good 2QF11 Results;
Conference Call Highlights
Impact on our views: We remain OW on Hathway
since we feel it is likely to be a major beneficiary, over
the medium term, of the ongoing digitalization of Indian
pay TV market as it strives to consolidate its position as
a leading MSO. Near term catalysts may however be
lacking.
What's new: Hathway announced 2QF11 PAT of
Rs.117m vs. Rs.16m in 1QF11. Revenue grew 20%
sequentially and EBITDA margin expanded 128bps to
22% in 2QF11
Key highlights from post earnings conference call
Digitization-key near-term focus area: Focus officially
seems to be on a mix of digital cable addition and LCO
acquisition (the company’s target is to add 200k primary
subscribers till F11 end) but tacitly the company is
admitting that, near term, digital cable addition is the
bigger growth area.
Subscriber addition has been muted in 1HF11: In the
past six months about 100k paying subscribers have
been added on analog cable and 165k have been added
on digital cable base. The paying subscriber base has
reached 1.74m and digital subs base is now at 1.19m.
The company feels LCO acquisitions beyond 4 times
EBITDA and 24 months of ARPU are too expensive and
hence has been slow on this front. However we expect
this to improve as the company renews its thrust on
digitalization.
ARPU growth to be driven by digitization premium:
Primary point ARPU remained constant sequentially at
Rs.185 while ARPU for indirect subscribers widened to
Rs.156 from Rs.152 in 1QF11. For directly held digital
subscribers, Hathway is currently receiving about Rs
15-20 ARPU premium and plans to enhance ARPUs by
increasing the digital subscriber proportion in total
subscriber basket.
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