Cable and broadband services provider Hathway Cable and Datacom may have dismissed being Reliance Jio's acquisition target as “speculation” but it's MD Rajan Gupta admits that the data tariff war has created headwinds for his company. In a chat with BusinessLine , Gupta details Hathway’s plans to retain and grow its high-end broadband subscribers, paring debt and cutting costs to grow revenues. Excerpts:
Your broadband business is growing but the ARPUs have fallen from ₹740 in FY17 to ₹690 in this June quarter.
In broadband, we had a terrific run for two years. We enjoy more than 40 per cent EBITDA margin. On the one hand, we are acquiring consumers at the top-end consuming 100 GB or 200 GB data and on the other hand, consumers at the bottom, using 5 GB or 10 GB, are migrating to mobility. With the demand ecosystem exploding, a lot of customers are increasing data usage but a lot of marginal consumers are not hooking on to OTT (over-the-top). They are primarily email and WhatsApp users, who are going to mobility because of low data pricing there.
How does this impact the business?
On one side, there is a huge increase in usage by some consumers while some others are leaving and this has created some kind of headwinds in the business. But we are investing in the business for the long term by creating the right fibre-to-home infrastructure, partnering with all the content and technology companies and alongside, we are cutting costs.
How are you controlling costs?
Our broadband capex used to be ₹10,000 (per subscriber including last mile and wi-fi modem) some years back. We have reduced it to ₹7,500-8000 per subscriber. It won’t go down further though. Last year, we also reduced our operating expenses by ₹50 crore. Here, automation was the key driver. We have automated every process and become a lean and mean company. We have reduced the number of layers from 10 to five. We are working with bots. The idea is to pretty much automate everything.
Your content cost, however, has been going up over the years.
Our content cost this year will increase by about ₹40 crore at the net level. And we don’t see much increase for some time as all the agreements have already been signed.
Hathway’s debt is over ₹1700 crore. What is being done to pare it?
We are going to reduce our debt by ₹500 crore over a period of two years. It’s a mix of fund infusion by promoters and internal accruals. Out of that, ₹200 crore infusion has happened by August-end. It is happening as per the plan.
How will you grow broadband revenues in this low-tariff market?
For broadband, I think the focus for the next two quarters is on completing the process of clean up of consumers. We want users at the bottom of the pyramid to go out of our system as they are not real broadband consumers. They came to fibre broadband due to price arbitrage as mobility used to cost ₹300 per GB back then. It is rather good to clean them as we can use the resources for acquiring high data usage consumers, who will be our target going forward.