Cable TV operators margins shrink but future is Broadband

“Of every Rs 100 earned by us, we give Rs 55 to pay channels and Rs 15 to the government. If the entertainment tax is increased to Rs 30, we have hardly any money to re-invest in the business or in building the digital infrastructure,” said Kulbhushan Puri of Federation of Cable Operators Association of Maharashtra. Hence, sell out to the big sharks is the only way out.

The industry has already seen many cash-rich multinationals buying out small cable TV operators to provide various value added services like multi media telephone,internet, data transfer, and video conferencing etc.

“Of the 7-8 lakh cable TV homes in Mumbai and surrounding areas, close to 3,000 operators are providing the services which brings a monthly revenue of Rs 70 to 80 crore. If we give 30 per cent to the government and 55 per cent to pay channels, we will not make money and we have to sell out to others,” Puri laments. “And even if the government want to levy an entertainment tax,let them take it directly from the customers as we do not want to be their collecting agents,” he adds.

After paying for equipments and salaries, an average small cable TV operator with 500 connections has no funds to invest in providing other services like internet, says Puri.

In order to make the cable TV connection `reverse path ready’ with reverse path amplifiers, connectors and routers in headends riding on the fibre optic network, a minimum of Rs 2,500 investment per home is necessary which a small cable TV operator can not afford. Hence, the multinationals including home-grown Zee TV and In Cablenet are taking over the small fishes.

Rupert Murdoch’s Star TV will be investing close to $80 per home in setting up its own broadband backbone while Zee has lined up investments of over $200 million in upgrading its cable TV network.

In Cablenet, which claims to have cornered a market share of 80 per cent, has already built up Mumbai’s first information superhighway, with the first 550 mhz cable system being upgraded to a broadband network with fibre optic trunking.

Industry analysts say that the figures provided by the association is almost 30 per cent conservative as many cable TV connections are subscribed by societies and then re-distributed. Besides many connections are not revealed in order to evade tax.

“This is time for us to consolidate. If we do not invest in providing more services, we are doomed. If the subscribers do not pay or shifts residence or just disappears, we have to pay it from our own pockets,” adds Ravi Singh, President of the federation.

In the months to come, the profit margins of the industry, say cable TV operators, would come under severe strain when Direct to Home (DTH) services are allowed by the government. With DTH services, a customer can directly access the satellite TV channels with digital transmission thanks to a saucer-shaped satellite antennae and a decoder box costing about Rs 15,000.