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DEN Networks: Tapping the fixed broadband opportunity

September 19, 2018

DEN Networks: Tapping the fixed broadban...
Currently, the fixed broadband segment in India is witnessing significant action. Rapidly increasing consumption of on-demand video content and other bandwidth-intensive services has led to exponential growth in the demand for affordable highspeed fixed broadband. Several companies are moving to tap this opportunity, one of which is DEN Networks. Founded in 2007, DEN Networks is a mass media and entertainment company that provides cable TV, online video streaming and broadband services. So far, DEN has provided digital entertainment services to over 13 million households spread across 433 cities in 13 key states. Interestingly, it is the first cable TV company to have gone public in the third year of its operations and has the largest cable TV subscriber base in India.

Operations

Headquartered in New Delhi, DEN Networks has a notable presence in Delhi, Uttar Pradesh, Karnataka, Maharashtra, Gujarat, Rajasthan, Haryana, Kerala, West Bengal, Jharkhand, Bihar, Madhya Pradesh and Uttarakhand. The company primarily offers cable TV and broadband internet services. As of June 2018, DEN had 7.2 million cable TV subscribers, a 3 per cent year-on-year decrease from 7.4 million in the corresponding quarter of 2017. With the proportion of high definition (HD) subscribers in India expected to increase from 6.8 per cent of the total subscribers in 2017 to 10.9 per cent of the total subscribers by 2022, DEN recently started offering HD set-top boxes (STBs) to customers to augment revenues. In DEN’s case, the pricing differential between standard and HD subscribers is Rs 75-Rs 100 per month per STB.

The company forayed into the high speed broadband services business in 2014 and operates under the brand name DEN Boomband. DEN uses Cisco’s data-over-cable service interface specifications 3.0 technology to provide broadband services and also has a robust fibre optic network. DEN’s broadband subscriber base stood at 106,000 during the quarter ended June 2018. Further, DEN also offers over-the-top (OTT) and video-on-demand entertainment to its customers through a mobile application, DEN TV+. The app is an online repository of more than 2,000 movies and has content on a plethora of topics including health and lifestyle, education, etc.

Financial performance

DEN Networks’ revenues increased by 9.68 per cent from Rs 11.98 billion in 2016-17 to Rs 13.14 billion in 2017-18. During the quarter ended June 2018, revenue from operations for the quarter remained constant at Rs 3.14 billion compared to the corresponding quarter in 2017. Cable TV subscription, placement and activation revenue stood at Rs 1.7 billion, Rs 850 million and Rs 240 million respectively during the quarter. Meanwhile, revenue from broadband operations stood at Rs 160 million, down from Rs 210 million in the corresponding quarter of 2017, owing primarily to the falling ARPU. Broadband ARPU decreased 24 per cent from Rs 725 during the quarter ended June 2017 to Rs 552 during the corresponding period in 2018.

Broadband expansion plan

Recently, DEN Networks launched its fixed line broadband 100 cities plan to expand its affordable high speed broadband offerings to 100 cities within a year’s time. DEN has adopted an asset-light model and is partnering with last-mile owners for implementation. It also aims to derive synergies from its existing cable network. The company aims to use the franchisee model with prepaid collection, and leverage the existing infrastructure and resources in order to lower its capex and operational costs. As per the plan, DEN will operate a centralised network operations centre (NOC) to provide standardised technical solutions and customer support, and will use affordable technologies such as metro ethernet and gigabit passive optical network (GPON) for providing services.

As of June 2018, DEN has covered 28 cities and has enrolled a total of 8,424 fixed line broadband subscribers, garnering an ARPU of Rs 562 and resulting in average data consumption of 64 GB. DEN is offering speeds ranging from 10 to 100 Mbps in the cities covered under this plan.

The way forward

So far, the adoption of fixed line broadband has been slow in India, with penetration limited to around 7 per cent in stark contrast with the developed countries which have 60-70 per cent penetration. However, this is changing as consumers demand and consume more bandwidth-hungry applications, which can only be supported through fixed line broadband. The future outlook for the segment is extremely bright which is also evident from the growing competition in this space.

DEN Networks will likely face strong headwinds from Reliance Jio Infocomm Limited (RJIL), which entered the fixed broadband segment with the launch of Jio GigaFiber in 1,100 cities in July 2018. RJIL’s aggressive pricing is expected to impact subscriber addition, revenue growth and drive ARPU downwards. A positive sign for DEN, however, is the consistent increase in subscription rates and ARPU in its cable TV business. Moreover, the company’s management is confident of its ability to sustain competition and function at lower price points on the back of the low capex model it has adopted for its 100 cities plan.

 
 

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