Hathway Cable and Datacom, one of India’s biggest cable feed providers, has again turned profitable, but it also reported an increase of Rs 87 mn in its pay channel costs while subscription revenue increased by only Rs 37 mn.
Given that subscription revenue increased only 1% while pay channel costs increased 7%, it is likely that there was zero or even negative subscriber number growth during the period. This can be further explained by looking at the rising share of pay channel charges in the overall subscription amount collected by Hathway.
In April-June, Hathway paid as pay channel charges Rs 37.12 to broadcasters from every 100 rupees of subscription charges it collected from its customers. This rose to 39.13 rupees in July-September.
This could either be because Hathway lost a lot of incentive discounts during the quarter, started paying a higher share to local cable operators, or more likely, there was a reduction in network charges paid by subscribers and an increase in pay channel charges.
However, a reduction in network charges is possible only if the number of subscribers fall. It is therefore quite possible that there was a reduction in the number of subscribers during the quarter, even though existing subscribers started consuming more and more pay channels.
Cable companies, such as GTPL Hathway, have commented that customers are starting to subscribe to more and more pay channels after holding on to their cash during the March-April period.
The company gives only a rounded number for its subscriber figures, which has remained at 6 mln during both periods.
Despite a higher payout to channel-owners, Hathway managed to report a healthy increase in its profits due to a sharp reduction in its expenditures.
It reduced its ‘other operating expenses’ by a whopping Rs 232 mn (18%) during the quarter compared to Apr-June.
It is likely that ‘other operating expenses’ are related to the roll-out of the new tariff regime, such as those related to the implementation of new billing and channel activation systems and so on. This item of expense had shown a sudden increase after the implementation of the NTO.
A year ago, ‘other operating expenses’ were only 683 mn, while it rose to Rs 1,258 mn in Apr-June, before falling to 1,026 mn in July-September.
Hathway is one of the few operators that has seen a sharp decline in its pay channel costs after the new tariff scheme came into effect in early 2019.
The company’s pay channel costs had been in the range of Rs 1,600 mn per quarter before the new tariff regime came into effect, and fell to just Rs 1,301 mn in Apr-June, before increasing again to Rs 1,386 mn in July-September.
Still, the company’s pay channel costs are lower by 13% compared to July-September quarter of last year, even as subscription revenue has jumped by 20% compared to last year.
As a result, Hathway’s operating profit for July-September this year is up 30% compared to the same period last year and it has moved from a loss-making firm to a profitable one.
Compared to a loss of a whopping Rs 847 mn before tax last year, the company has finally posted a profit of Rs 56 mn (before taxes) for Jul-Sep this year.
The company’s profits may improve further if TRAI tweaks the tariff order in coming days, as seems likely.