After
losing top quality talent to Reliance Jio Infocomm, Hathway plans to transfer the broadband business into its wholly owned subsidiary called
Hathway Broadband Pvt Ltd. We understand there will be no change in the beneficial interest of shareholders in this business post the demerger. This demerger will need approvals from several agencies such as the High Court and Department of Telecommunication and hence the consummation may take 6-9 months from now.
Hathway offers Docsis 2 (since 2007) and Docsis 3 broadband services (50 mbps speeds) to a total subscriber base of 0.46mn at end-June 2015. The company has been adding 10,000 net subscribers per month on Docsis 3 and expects this to accelerate going forward. Also broadband enjoys superior operating margin of 35%+ compared to 20-25% for the cable TV business. The company exited F1Q16 with a broadband ARPU of Rs577 and Docsis 3 ARPU of Rs850.
A separate subsidiary will potentially improve focus on the broadband business as business performance will be separately available to both management and investors. While we believe the company may not be looking for funding at this point in time, this reorganization may help in attracting strategic/financial investors at a later stage.
