BENGALURU:  ACT continues to lead the wired broadband growth in calendar year 2015 with 1.9 lakh subscribers(or 23.46 percent of the total all India additions since December 31, 2014) additions fromDecember 31, 2014 until September 30, 2015. However, month-on-month, Bharati Airtel leads growth in subscription numbers by contributing 40,000 additions or 30.77 percent of the 130,000 broadband numbers added all India in the month of September 2015. ACT added 30,000 subscribers or 23.08 percent of the total broadband subscribers added in September 2015. BSNL added 10,000 or 7.69 percent of the total subscribersadded in September 2015. Both MTNL and You BB did not report any change from their August 2015 subscription numbers.

Are the MSOs’ initiatives by carrying internet on their cable TV infrastructure beginning to show? Definitely yes! Will they surpass the numbers attained by the top 5 ISPs’? Maybe with a concentred effort, yes they may, but it will take plenty of doing and make take some time.Please read on.

Note:(1) 100,00,000 = 100 Lakh = 10 million = 1 crore

(2) Trai reports indicate data in millions of numbers up to 2 decimal places. Hence it is assumed in this report that a figure of 0.47 million (4.7 lakh) subscribers for You BB for July-2015 would be granular to the nearest 10,000. While percentages perforce have been mentioned up to two decimal places, the accuracy may vary, depending upon the exact number.

(3) Industry sources say that Trai numbers in the case of ACT for May-2015 are incorrect at 0.66 million and the correct number would be 0.693 million. This paper considers the number as 6.93 lakh or 0.693 million.

(4) MSOs’ have a number of subsidiaries and alliances, hence broadband numbers are split as applicable. The consolidated subscription numbers of these entities could be larger. Hathway is a case in point.

(5) Ortel’s numbers for Q3-2015 have been estimated from the numbers released by it for Q1-2015, Q2-2015, Q4-2015 and FY-2015.

(6)  The term ‘operating revenue’ in this paper indicates ‘total income from operations’.

The Top 5 ISPs’

The latest subscription numbers disclosed by The Telecom Regulatory Authority of India (Trai) as on September 30, 2015, reveal that the total number of wired broadband subscribers in India stood at 161.3 lakh. Hence 8.1 lakh subscribers were added between December 31, 2014 and September 30, 2015, and 1.3 lakh subscribers were added in September 2015. Please refer to figure 1 below

The pecking order for the top 5 wireline internet service providers or ISPs’ remains the same with the top three – Bharat Sanchar Nigam Limited (BSNL), Bharati Airtel (Airtel) and Mahanagar Telecom Nigam Limited (MTNL) also providing voice (telephone) services and many of their wired internet customers use both services – voice and data. The big three are followed by ACT (Atria Convergence Technologies) and You Broadband India Private Limited (You BB).

Please refer to figure 2 below. As mentioned above, ACT still continues to lead the growth in wired broadband subscriptions with a net addition of 30,000 subscribers in September 2015, taking its tally to 1.9 lakh subscribers (23.46 percent of the all India additions) added sinceDecember 31, 2014.Hence ACT’s market share in the wired internet space in India improved by 15 basis points to 4.96 percent in August 2015 as compared to 4.81 in Aug-2015. Since December 31, 2014, ACT’s market share has gone up 98 basis points (from 3.98 percent) based on a granularity of 10,000.

However, telecom major Bharti Airtel is swiftly closing the gap. Like in August2015, the behemoth added 40,000 wiredinternet subscribers in September 2015, taking its tally to 1.7 lakh subscribers (20.99 percent of the all India additions) added between December 31, 2014 and September 30, 2015.  Airtel’s market share improved 17 basis points to 9.80 percent in Sep 2015 as compared to 9.63 percent in Aug 2015. Airtel had a market share of 9.20 percent on December 31, 2014.

You BB did not report any subscriber additionsin September 2015, its tally remained the same at 4.8 lakh subscribers until September 30, 2015, and it had a net addition of 60,000 subscribers (7.41 percent of the all India additions) since December 31, 2014. Hence You BB’s market share has declined by 2 basis points to 2.98 percent in September 2015 as compared to the 3 percent in August 2015. You BB had a market share of 2.74 percent as on December 31, 2014.

The public sector BSNL increased its subscription numbers by 10,000 to 99.3 lakh or 61.56 percent of the all India total. However, BSNL’s market share declined by 44 basis points as compared to 62 percent in August 2015.As on December 31, 2014, BSNL had a market share of 65.14 percent

 MTNL subscription numbers were the same as the numbers reported for June 2015, July 2015 and August 2015, and hence there appears to be no net growth in wired broadband subscribers on its part. However, since the overall market size is increasing,MTNL’s market share has also declined even further. MTNL lost 5 basis points to reach a market share of 7.01 percent as compared to 7.06 percent in August 2015. As on December 31, 2014MTNL had a market share of 7.38 percent.

MSOs’ contribution to broadband

The combined subscription number of the top five wired ISP’ as on September 30, 2015 was 139.2 lakh or 86.30 percent of the total number of the 161.3 lakh wireline broadband subscribers in India. On December 31, 2014, the corresponding combined number was 135.5 lakh or 88.45 percent of the total number of 153.2 lakh broadband wireline subscribers in the country. The combined share of overall wired internet subscribers of the top five companies is declining, with other players increasing their contribution to wireline broadband subscription numbers.

The decline between December 31, 2014 and September 30, 2015 was 147 basis points. Other ISP’s share of subscribers has increased to the same extent. Among the ‘Others’ are included Cable TV MSOs’. MSOs’ in India are looking at broadband revenues to prop up their cable revenue numbers because of the comparatively higher ARPUs’ from broadband internet services.  Please refer to Fig 3 below.

In the three month period starting July 1, 2015 until September 30, 2015 or Q2-2016 (current quarter), the wired internet subscriber base in the country has grown by 4.3 lakh. Of these, the top 5 ISPs added 2.3 lakh subscribers or 53.49 percent of total additions in Q2-2016. At the same time, MSOs’ have started reporting double digit increase in internet subscribers and revenue.  Four MSOs’ – Hathway, Siti Cable, Ortel and Den added 1.09lakh (25.34 percent of total additions in Q2-2016) subscribers during that period as per their financial reports filed at the bourses.QoQ, the combined broadband subscribers in Q2-2016 added by the four MSOs’ increased by 58.36 percent from 0.69 lakh added in Q1-2016.

For Q1-2016, if the drop in broadband subscription numbers to the extent of 50,000 and 10,000 by BSNL and MTNL respectively is neglected, the other three players among top five wirelineISPs’ in India added 1.2 lakh (37.50 percent of total additions in Q1-2016) of the 3.2 lakh subscribers added in that period.If the drop in subscriber numbers by BSNL and MTNL is considered, the top 5 ISPs’ added just 0.6 lakh wireline broadband subscribers or 18.75 percent of the total subscribers added in Q1-2016. The four MSOs’ contribution to the subscriber base was approximately 0.69 lakh or 21.50 percent of the total additions in Q1-2016. Hence in Q1-2016, four MSOs’ actually added more subscribers than the combined number of subscribers added by the top 5 wired ISPs’ in India.

Cable companies such as Hathway reported consolidated internet subscription numbers of 5.15 lakh with 2 lakh asDocsis 3.0at the end of the current quarter (Q2-2016). While ACT has laid separate optical fibre for internet and is exploring territories beyond which it has cable TV operations, for the other MSOs’ it is a lot cheaper to have the internet signal ride on their existing cable TV networks wires.

Last quarter (Q1-2016), Ortel announced that it had introduced free broadband option for all Ortel Cable TV subscribers in the states of Odisha, West Bengal and Chhattisgarh as a complimentary special value added service in order to target to deeper penetrate into markets by making internet affordable. Ortel says that its offer includes a free data limit every month for a year. The subscriber will be charged a nominal amount after exceeding the free data usage for the month.

Some MSOs’ broadband numbers

Broadband contributes in double digit percentages to the total incomes or operating revenue of two of the four sample companies in this paper – Hathway (about 25 percent and growing) and Ortel (declined from 21.07 percent in Q1-2015 to 16.80 percent in Q2-2016). Please refer to Fig 4 below. In the case of Siti Cable and Den, revenue from broadband services contributed to less than 5 percent to their operating incomes.

Hathway reported broadband revenue of Rs 71.9 crore (26.24 percent of operating revenue) in the current quarter, 58.4 percent higher YoY than the Rs 45.4 crore (17.23percent of operating revenue), and 10.4 percent more than the Rs 65.1 crore (24.62 percent of operating revenue)in the immediate trailing quarter.Last quarter, the company said that it had added 50,000 broadband subscribers in Q1-2016, and claimed a broadband subscriber base of 4.6 lakh, of which 1.7 lakh were under Docsis 3.0. Hathway says that broadband ARPU increased 6.8 percent QoQ to Rs 616 from Rs 577 and that its Docsis 3 consumer ARPU has reached Rs 750.

Siti Cable says that it has added 16,950 broadband subscribers in Q2-2016, taking its broadband subscriber base to 91,450 from 74,500 in the previous quarter. Broadband revenue increased 50 percent YoY in Q2-2106 to Rs 9.30 crore (3.30 percent of operating revenue) from Rs 6.20 crore (3.95 percent of operating revenue) and increased 3.3 percent QoQ from Rs 9 crore (2.83 percent of operating revenue).

Ortel’s broadband customers grew 8.9 percent to 63,663 in the current quarter from 57,528 in Q2-2015 and grew 4.5 percent from 60,900 in Q1-2016.Ortel’s broadband ARPU in Q2-2016 was Rs 395, in Q2-2015, it was Rs398 and in Q1-2016, it was Rs 393. Ortel reported 11.7 percent growth in YoY total broadband services revenue to Rs 8.1 (16.80 percent of operating revenue ) crore in the current quarter as compared to Rs 7.3 crore (19.89 percent of operating revenue ) and a 7.9 percent QoQ growth from Rs 7.5 crore(17.40percent of operating revenue).

Den says that it has added 21,000 subscribers in the current quarter as compared to 12,000 in Q1-2016. Its total broadband subscriber base in Q2-2016 was 57,000 as compared to 35,000 in Q1-2016 and 16,000 in Q2-2015.Den’s broadband revenue increased 58 percent in the current quarter to Rs 8.23 crore(3.03 percent to operating revenue)  as compared to the Rs 5.21 crore (1.96 percent of operating revenue) in Q1-2016 and Rs 1.44 crore (0.49 percent of operating revenue) in the corresponding year ago quarter.

End points

The four ISPs’(other than ACT) in this report that use their MSO platform for internet service delivery currently are –Hathway, Siti Cable, Ortel and Den in that order in terms of number of broadband internet subscribers in Q2-2016. Three of the four have cable TV subscribers in excess of 100 lakhs each on a consolidated basis, while Ortel had around 5.72 lakh revenue generating units (RGUs)as on September 30, 2015.

The largest cable TV ISP among them is Hathway with 5.15 lakh subscribers, or just around 5 percent of its total cable TV subscriber base. In the case of Siti Cable and Den, their own internet penetration within their respective cable TV subscriber bases is less than 100 basis points. Many of these MSOs’ subscribers must have opted for internet services from other ISPs’, and all must have some non-cable TV  broadbandinternet subscribers. For these MSOs’ (and other MSOs’) the potential for converting their cable TV subscribers to double play subscribers is huge. This is the low hanging fruit that the MSOs’ can easily pluck if they do it right and increase their revenues and profitability.