With less than 45 days remaining for the March 31 deadline of the second phase of digitisation, the multi-system operators (MSOs) are expected to cough up Rs 2,500-3,000 crore for set-top-boxes (STBs).
There are five major MSOs - Hathway Cable and Datacom, Den Networks, IndusInd Media and Communications Ltd (IMCL), Citicable and Digicable - in the market.
In line with the digitisation programme of the information and broadcasting ministry, the second phase will see the mandatory switch-over from analogue cable to digital addressable systems (DAS) in 38 cities in 15 states. The first phase, which covered four metros of Delhi, Mumbai, Kolkata and Chennai, has seen a partial success with only Delhi and Mumbai switching over to DAS.
However, experts believe the ball has been set rolling this time and all stakeholders - the ministry, broadcasters and MSOs - are serious. The only problem, it seems, is the wide estimate of the STB requirement for the second phase, which ranges from 14 million to 25 million.
"It's a wild canvas. The LCOs (local cable operators) never shared the actual numbers in the past and so all the MSOs are making their guesstimates based on upward projection and expecting an incremental market share," a senior analyst, who tracks the industry, said.
"However, looking at the overall universe, census data and ministry numbers, we still believe that the number of STBs required in the second phase will be close to 16-20 million. So on the outer limit, a total investment will be close to Rs 2,500 – 3,000 crore," the analyst added, requesting anonymity.
Recently, Uday Kumar Varma, secretary at the broadcasting ministry, said: "It has been estimated that 16 million STBs would be required to digitise the 38 cities, excluding the four metros. A study conducted by the ministry has revealed that 6 million TV sets in these cities are already digitised."
The calculation is based on the fact that one STB costs Rs 1,500 to an MSO.
Among the MSOs, Hathway has a requirement of Rs 300 crore for the second phase. It has already seeded 1.5 million boxes and is looking at an additional 3 million STBs in the 25 cities, where it has presence. It will not go for equity financing, but will raise from debt and vendor financing, G Subramaniam, chief financial officer (CFO) at Hathway, had told Business Standard earlier.
Den Networks has also lined up debt financing. It is expecting to seed 3.5-4 million boxes.
"We have lined up necessary debt funding and have no plans for incremental funding at present. If the STB requirement exceeds our estimation, we will need more funds," M G Azhar, chief operating officer, Den Networks, told Business Standard.
Digicable is targeting 1.4 million STBs and will require Rs 300 crore. "We are present in 13 out of the 38 cities. Not adding our joint venture in Punjab, we will seed close to 1.4 million boxes," Sisir Pillai, chief strategy officer at DigiCable, said.
IMCL, the Hinduja group company, has a total requirement of about $100 million (Rs 540 crore) for the second phase, which is largely met through debt, said Dilip Panjwani, CFO at IMCL. He added that while the company was not stressed for funds for the second phase, it is open to raise up to another $100 million for growth and consolidation opportunities. IMCL has seeded 1.2 million boxes and its target is between 3-5 million boxes in the phase II.
Officials from Citicable were not available for comments.
Meanwhile, its not just MSOs who are raising funds for digitisation. Among direct-to-home (DTH) players, while Videocon D2H has filed for an initial public offering of Rs 700 crore, Tata Sky is in the process of raising funds and looking at various options. Tata Sky has decided of an equity infusion of Rs 500 crore every year in the short term to meet fund requirements.
The subscriber acquisition cost for a DTH is higher at Rs 2100-2400, compared to an MSO as DTH players have higher marketing costs.