GTPL Hathway, the No.2 cable feed provider and No.6 wired internet provider in India, has started providing internet services through local cable TV operators or LCOs outside its home market of Gujarat.
The strategy, as well as a spurt in demand for high-speed internet, helped it report a 10% sequential growth in broadband revenue in the three months ended September, even though profit margins fell.
The company’s revenue from its broadband business crossed the Rs 100 cr/quarter mark for the first time in the July-September period, and reported a top line of Rs 100.6 cr, up from Rs 91.9 cr in the three months prior (Apr-Jun 2021).
At the same time, profitability at the fast-growing wired broadband business took a knock during the latest three-month period. Pretax profit at the broadband business unit fell to Rs 5.1 cr from Rs 16.6 cr in the previous (Apr-Jun) period. Even in the year-ago period of Jul-Sep 2020, the company had a higher PBT of Rs 10.0 cr at the broadband business.
Part of the reason for the lower profitability may be the pressure to deliver faster and faster services at lower and lower price points.
The company’s core market of Gujarat also happens to be key market for Reliance Jio, which ironically is also a part owner of GTPL Hathway through its majority stake in Hathway.
Nevertheless, wired broadband prices have gone down drastically in the last 1.5 years as companies pull out all stops in a mega ‘land grab’ aimed at signing on as many as possible of the new subscribers who have come to the market looking for high-speed connectivity in the post-COVID world.
Starting with Reliance Jio in late 2019, all wired operators have slashed their prices by around 50% over this period.
For companies like GTPL Hathway, this has also meant investing hundreds of crores in setting up, or purchasing, fiber optic connectivity in different towns and routes in an effort to ensure speeds of 50 Mbps or more to end consumers and keep the competition away.
GTPL has also invested massively to expand its broadband footprint. Over the last 12 months, the company has made its broadband network available to an additional 5 lakh homes, taking the total number of ‘homes passed’ to 42 lakh or 4.2 mn.
These increased home passes do not immediately convert into revenue, as the company will take several months to actually convert these passed homes into subscribers. However, they do turn into increased costs immediately, as these new assets have to be maintained, and depreciation accounted for.
The company has also started providing upstream broadband connectivity to its local cable operator partners outside Gujarat, besides providing television signals. It said it continues to provide end-to-end broadband services in the state of Gujarat, without going through LCOs.
At the same time, the company has identified ‘expansion through business partners’ as one of its three key growth strategies for its broadband business.
The broadband business accounts for only one-sixth of the company’s total revenue, but accounted for Rs 9 cr out of the incremental revenue of Rs 15 cr generated during the September quarter. As such, it is seen as strategically important for the company’s future, particularly given that many customers are switching away from linear TV that currently provides the bulk of GTPL Hathway’s revenues.