With the President giving her approval to the Ordinance on mandatory digitalisation, at least $200 million (R1,000 crore) will be required by organised cable firms to digitise the 12 million analogue cable homes across the four metros.
As a result, large cable firms like DEN, Hathway, InCable and WWIL are looking for vendor credit for set-top box (STB) acquisition with staggered payments over next 36 months, hike in foreign direct investment limit to 74% and import duty exemption on STBs, among other steps, to meet the government-mandated ‘must digitise by 2014’ law.
According to Media Partners Asia (MPA), a leading international media research firm, between Hathways, DEN and WWIL, around R560 crore of investment will be required in the four metros towards digitalisation. Hathways will have to digitalise 1 million subscribers, while DEN and WWIL will need to provide digital STB to 1.7 million and 1 million, respectively.
However, as a first incentive, instead of the cut-off date of March 31, 2012, the deadline for digitisation of the cable homes in four metros will now be June 30, 2012, official sources said. This means, the large cable firms will now have eight months to plan out their investments and other requirements for the four-metros. Companies like DEN, Hathway, InCable and WWIL say they are sitting on only around R500 crore of cash on books. Which means, in order to cover the entire country, most cable companies will require money.
?The cable industry is desperately looking at overseas funding from private equity firms to meet their requirements, which, according to one estimate, require R30,000 crore of investments. Relaxation in FDI caps, vendor credit, and import duty waivers, etc., will be required within the next couple of months if the government wants to help the industry digitise within the set timelines,” said a senior executive of MSO Alliance, the apex body of large cable companies.
“Financially, some of the national cable operators are well equipped, considering their balancesheet position and reach across various phases of mandatory digitisation. ?Among listed national MSOs, Hathway, DEN and WWIL have cash on books of around $25 million, $50 million, and $8 million respectively,” MPA said in its report.
Out of its total reach of 8.7 million homes, Hathway has around 1.8 million digital subscribers covered in the Phase-1 areas. “However, the company has already seeded digital boxes in 800,000 homes and will, therefore, need to incur capex on the balance one million homes,? MPA report said. With an average cost of R1,250 per STB, DEN will have to incur capex of R300 crore in the Phase-1 of digitisation. WWIL will be seeding 1 million STBs in Phase-1 and will incur capex of R120 crore and an additional investment on network upgrades, the MPA report said.
