www.hathway.com Hathway Cable & Datacom Limited Investor Presentation – December 2011
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1 Safe Harbor
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
Cable TV | Broadband 2 India Opportunity for Cable TV
3 Cable TV : The Opportunity for addressability (Digitization)
Indian Population : 1.2 Billion (239 Million House)
TV Households (147 Million)
Pay TV (127 Million) Others (20 Million)
DTH Analogue Digital Cable (32 Million) (89 Million) (6 Million)
Source : MPA 2011
Cable TV | Broadband 4 2015 : World’s 2nd largest Cable TV Market
300 246 254 261 268 70%
239 216 223 231 200 155 162 169 175 65% 127 134 141 148 100 60%
- 55% Subs in Million Subs FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Total Household TV Household %
200 90% 92% 94% 95% 100% 81% 86% 76% 72% 166 80% 150 149 158 139 127 114 60% 100 102 91 40% 50
20% Subs in Million Subs - 0% FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Pay-TV Penetration (% of TV HHs) Pay TV Subs
150
94 97 99 101 102 100 83 88 91 64 50 57 41 50 32 23
8 15 Subs in Million Subs 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Cable / Digital TV DTH Source : MPA 2011
Cable TV | Broadband 5 Digitization Time Line of MIB
Phase I Phase II Phase III Phase IV
4 Metro: Delhi Mumbai Kolkata All Urban areas All 1 Mn + Cities : Chennai (Municipal (Cumulative Rest of India : (Cumulative Corps/ population : 70 Dec-14 Population : 36 Municipalities) Mn **) : Mar-13 Mn **) : Sep-14 June-12
Sunset date for analog cable across India : Dec-14
Source : MIB notification dated : 11th November 2011
Cable TV | Broadband 6 Mandatory Digitization – Finally to be a reality, soon!
● 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 7 DAS : Favorable regulatory environment…..
Regulatory Impetus now provided…
Several recommendations & Incentives for Cable Companies to Promote Digitization
Increased Foreign Others Investment * Supreme Court‘s interim order has capped content cost in digital platforms at 42% of analogue platforms Recommended * Recommended Income Tax Holiday till 31st March 2019 for companies that invest in increase in foreign DAS investment limit from * TRAI has recommended waiver of Duties on Digital Headend Equipment & STB 49% to 74% for MSOs * 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 going digital would become easier
Source : TRAI
Cable TV | Broadband 8 Cable seen as the largest broadband delivery platform TRAI announces National Broadband Plan –
• 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.
Source : TRAI
Cable TV | Broadband 9 DAS : Relative SWOT over DTH
DAS has higher capacity (> 1k Channels) Better branding by DTH Drive C&P No territorial limitation Lower SAC (Rs.1,575 Vs Rs.~2,800 for Dish TV) -scale advantage goes to DTH No rainfall attenuation DTH : 100 % Prepaid Model Quick & Localized customers Cable : Dependent on LCO for last mile services Lower Marketing spends DTH : 10% licenses fees + 5% Transponder costs
Bundling with Broadband Well capitalized (Triple Play Opportunity) – DTH players can be aggressive Localized content Vertically integrated giants VOD Vs NVOD – unfair competition Inter active services (Tatasky/Dish Tv/ Sun TV) Synergy from other Business (Airtel / VideoconD2H / Reliance TV )
Cable TV | Broadband 10 Cable - the dominant and superior platform in India
Higher bandwidth / channel • Current cable infrastructure can offer more channels in digital format capacity • Ability to offer VAS like VOD, PPV & HD Service
Ability to offer regionally • No regulation prohibiting unique content from individual customised content headends
Potential for broadband cable • Broadband over same cable infrastructure – not possible in DTH services
Local on-the-ground customer • Quick response time service
• DTH suffers from poor signal quality in adverse weather Consistent signal quality conditions
• License fee, transponder cost and higher subscriber acquisition Higher cost base for DTH costs passed on to consumers
Cable TV | Broadband 11 Hathway Cable & Datacom Limited
12 Hathway’s National Foot Print positions it best
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 Note: C&S – Cable & Satellite
Cable TV | Broadband 13 Investment in new technologies
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
HD services to enhance customer viewing
New Ericsson Head-end / Compression Ericsson Technology to help increase channel network capacity 1st National MSO to launch HD services
Cable TV | Broadband 14 Our Existing Infrastructure allows ease of expansion
● Presence in 140 key towns and cities, including the top markets for advertisers and broadcasters Market leading presence in cable distribution in key geographies • Partnerships with global vendors – Cisco,Ericsson, Growing broadband network over existing cable NDS, CommScope, Humax, Incognito, Skyworth infrastructure • 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
* FY12 Q2 Numbers are unaudited consolidated numbers
Cable TV | Broadband 15 Supported by superior back end systems & Services
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
Cable TV | Broadband 16 Hathway has been at the leading edge of cable industry in India
1998- 2002 2004-2008 2009-2011
•2004 : Launched digital cable service • 2009 : & Reached 100,000 broadband • 1998 : The Promoters acquired •First MSO to launch DVR Service In India 100% stake. subscribers • Morgan Stanley, Kaup Capital & Arcadia •2000 : • 2007 : Chrys Capital acquired a 15% invest Rs. 2.4bn in FCCDs to be converted to •News Corp acquired a equity interest in Company equity at a later date 26% equity interest • 2008 : •Reached ~ 320,000 broadband subscribers
• Started Providing • Kaup Capital, MSPI & Arcadia Invested in Compulsorily Convertible • Reached one million digital cable Broadband services on debentures television subscribers DOCSIS Technology •Acquired 51% equity interest in • 2010 : The Company raised Rs. 4.8 bn •2002 : Acquired 200,000 direct Hathway Bhaskar Multinet Pvt. Ltd In Madhya Pradesh through IPO in Feb 2010 cable television subscribers during the two years •Acquired 50% equity interest in a large •2011 : 1st National MSO to launch HD services independent MSO in Gujarat
• Acquired two major MSOs in Maharashtra
Cable TV | Broadband 17 Value added service upside
Objective to increase ARPU by 45% end of phase II
HD Started HD Services in Mumbai, Pune, Delhi, Hyderabad, & Bangalore
Specialty Hathway’s Tiering Upside Broadband Channels Bundling with Cable TV Triggers with Average ARPU of (Like. Food, Travelling, Rs.500 per Month Fashion, Educational etc.)
Bundled Services offered to VAS Hathway Subscribers
Rs.50 Additional ARPU through VAS services VOD Negotiating with Films Libraries
Cable TV | Broadband 18 Hathway‘s HD Offers
Cable TV | Broadband 19 Hathway‘s Broadband Offers
Cable TV | Broadband 20 Clear Strategy to maintain leadership
8,655 Expand Width : 1.8 X 8,000 Enlarge the home reached base 4,728 6,000 through expansion of foot print 4,000
(‗000) Subs 2,000 - FY07 FY12 Q2 Homes reached (Cable)
1,835
1,500 2.4X Increase depth : 770 Acquire last mile to enlarge 1,000 paying subs Subs (‗000) Subs 500
- FY07 FY12 Q2 Total paying subs 1,703 1,250 Digitizing & cross-selling: 5.5X 1,000 Digitize the universe & cross-sell 750 392 281 broadband services 500
Subs (‘000) Subs 124 250 - FY07 FY12 Q2 Total digital Subs Broadband Subs * FY12 Q2 Numbers are unaudited consolidated numbers
Cable TV | Broadband 21 Robust track record of consolidation
● Track record of growth through consolidation • Since inception successfully identified, acquired and integrated several MSOs and LCOs Robust acquisition framework Target identification Partnership vs. Acquisition
● Growth, asset quality, distribution ● Retain management - leverage on the network and operational efficiency ground intelligence ● Incremental reach to garner higher ● Management retains minority interest – placement revenue helps align long-term interests
Upgrade network Enhance service quality
● Upgrade "last mile" to improve analog product quality ● Train LCOs - improve familiarity with services and procedures ● Offer digital services ● Ensure uniformity in service quality and ● Two-way enable network to introduce enhance the Hathway brand broadband services
Cable TV | Broadband 22 Leading the digitization of cable in India – C.1.7 million Digital homes
Customer advantages 6.1x growth in digitizing the network
● Superior customer experience 1,703 ● Customised local content 1,800 ● Expanded channel offering 1,600 240 ● VAS (EPG, PVR, NVOD, PPV) 1,400
1,200
Mandatory Digital 1,000 CAGR : 57% 6.1x Voluntary Digital 800 Hathway advantages ('000) Subs 1,463 600 ● Enhanced customer stickiness 400 281
● ARPU enhancement 200 189 ● Eliminates revenue leakage / under- - 92 reporting FY07 FY12 Q2
Hathway is the largest distributor of digital cable services
* FY12 Q2 Numbers are unaudited consolidated numbers
Cable TV | Broadband 23 Dominating market presence in cable broadband
Competitive advantages 4.1x growth in broadband subscribers
● Minimal incremental Capex which is further declining
● Better ARPU and EBITDA margins ● Enhance customer relationship
Subs (‘000)Subs
Multi-pronged growth strategy
● Cross-sell to cable universe through new homes passes ● Expand geographic footprint ● Attractive and cost-effective offering
Maintained c.27% penetration while growing homes passed significantly
* FY12 Q2 Numbers are unaudited consolidated numbers
Cable TV | Broadband 24 Performance Indicators – Operating Metrics
2.5x Growth in RGUs
2,500 2,227
1,835 2,000
1,500
894 770 Subs (000s) Subs 1,000
392 500 124
- Paying CATV Subscribers Broadband Subscribers Total RGU FY2007 770 124 894 FY12 Q2 1,835 392 2,227 Cable Home Reached 8.7 Million Leading Operator in Several Key Market #1 Cable Broadband Broadband Homepass 1.4 Million
* FY12 Q2 Numbers are unaudited consolidated numbers
Cable TV | Broadband 25 Financial Performance
8,000 Income 7,242 • Strong growth momentum across Cable & Broadband 5,775
6,000 5,357 • 2.9x growth in revenues over FY07-11
4,000Mn 3,222 ` ` 2,288 2000 25% 2,000 1,254 1,263 733 1,055 552 246 391 320 367 315 1800 - 1600 20% 20% FY07 FY08 FY09 FY10 FY11 Cable Broadband Other Operating Income EBITDA 18% 1400
EBITDA Margin Mn
` ` 1200 15% 15% • EBITDA growth from FY09 as 1000 Strategy bearing fruit 800 10% • Key operational expenses 600 declining with economies of Scale 7% 1,327 1778 1,037 CAGR (FY07-11) 400 5% 5% Cable 33% 200
Broadband 23% 222 213 0 0% Overall 31% FY07 FY08 FY09 FY10 FY11
Cable TV | Broadband 26 Consolidated Latest results
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%
Cable TV | Broadband 27 Standalone Latest results
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)
Cable TV | Broadband 28 Experienced Board
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
Cable TV | Broadband 29 Experienced management team
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.
Cable TV | Broadband 30 Shareholding pattern as of Q2FY12
16%
13%
5% 67%
Promoter FII DII Others
Promoters: Raheja group 49.53% News corp. 17.30%
Cable TV | Broadband 31 Hathway Cable & Datacom Limited Registered Office at ‘Rahejas’, 4th Floor, Corner of Main Avenue & V.P.Road, Santacruz West, Mumbai 400054 www.hathway.com
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