GTPL targets higher share of cable fees, no brand merger with Jio

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Gujarat-based cable feed provider and broadband operator GTPL Hathway said it will try to retain a higher share of what consumers pay every month, and is not currently looking to bring its broadband business under the Reliance Jio brand.

In its cable feed business, GTPL retains only about Rs 30 out of the Rs 130 paid by end-subscribers in the form of network access charge, though it does get to keep a share of the pay channel charges.

Speaking to analysts after the company’s quarterly results announcement, MD Anirudhsinh Jadeja and Chief Strategy Officer Piyush Pankaj said the company’s share of the monthly subscription revenue was lower by market standards.

The officials also pointed out that even the TRAI has suggested a revenue split of 45% for the cable operator and 55% for the feed provider in its standard interconnect agreement.

“The margin charged by GTPL from the LCO is coming to around 25-30%..if you see as per the SIA of the TRAI regulation, it is coming to 55:45, 55 for the DPO and LCO side. But right now, we are charging 25-30%. So, yes, the scope is there. In the coming two years or three years, we’ll achieve that target,” they told analysts. “We are giving our service at considerably discounted rates compared to other DPOs.”

The company said that on average, a customer was now paying almost Rs 250 plus tax. Out of this, Rs 130 is the network charge, which is divided between the cable operator and the feed provider (MSO), while the remaining Rs 100-120 comprise pay channel charges.

Out of the pay channel cost of Rs 100-120, GTPL gets to keep 20% (Rs 20-24) as dealer commission, but has to pass on the remaining to broadcasters.

In addition, said GTPL officials, the company also qualifies for special incentives from pay channel owners to the extent of another 15% of the MRP of the pay channels. In such cases, if a subscriber pays Rs 120 paid as pay channel charges, GTPL gets to keep around 35%, or Rs 42, which can be added to the Rs 30 from the network charge, taking the total to Rs 72.

However, the 15% incentive is payable only when GTPL is able to push the relevant pay channels to a given number of subscribers. “For 90% of broadcasters, we are eligible,” the officials company said, referring to the 15% incentive.

CONSUMERS TRADING UP

GTPL Hathway also said that it is noticing a tendency on the part of the consumer to start cautiously, and then increase their spending.

When TRAI’s new tariff order was first introduced in February, said GTPL officials, consumers switched to the cheapest packs available as they were wary of the way the new system worked.

“A lot of customers had come into the lowest packs in the beginning, and then they’re moving to the higher packs,” the officials said.

Because of this, the average revenue that GTPL gets from the local cable operator has risen to about Rs 130 per month per subscriber in June from around Rs 116 in the January-March period.

GTPL said it is currently focused on moving more and more subscribers to premium packs via various incentives.

It said roughly 75% of its subscribers are on packages designed by GTPL itself, and only around 25% have gone for the a la carte option.

“We have to give a lot of schemes and all that to move them into the higher packs and we’re confident that this will help us in increasing the ARPU.”

Jadeja also said it is too early to make long term predictions about ARPU and revenue levels, as broadcasters themselves are yet to find their optimal pricing and packaging structures.

Nearly all broadcasters, including Zee, Sony and Star, have been forced to either slash prices or introduce smaller, more affordable packs in an attempt to drive the penetration of their channels.

“Broadcasters are changing their prices and introducing smaller packages. They’re still settling. It will take a quarter or two,” the duo said. “Quarter 2 and quarter 3 will tell the whole story, about how the industry is shaping.”

RELIANCE JIO TIE-UP

Jadeja also dismissed speculation that the company is going to rebrand its services under Reliance Jio’s brand.

Reliance Jio has recently acquired a controlling stake in Mumbai-based feed provider Hathway, which owns about 37.4% in GTPL Hathway.

Along with another 4.5% held by Jio directly, the Mukesh Ambani-led firm’s stake dwarf’s the 16% stake held by Jadeja and other founders of GTPL.

Jadeja said GTPL Hathway is in talks with Jio to come up with a mutually acceptable working model.

This will involve porting part of the existing GTPL customers to Jio’s network and reserving certain areas for Jio’s to conduct its business, while targeting the other areas under GTPL’s operations.

“GTPL is carrying out its own [business] and Jio is carrying out its own…[We are trying to figure out] what type of synergy we both have. We are working on it and it is work in progress,” Jadeja said.

“We are also working on Jio porting, positioning area-wise also. Which city or which territory, which states…It will take one or two quarters,” he added.

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