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Cable TV rates to rise as operators team up

Anusha Subramanian

Your cable TV bills are about to almost double. India's four leading cable operators, the Hinduja-owned Incable Net, the Rupert Murdoch-controlled Star India's Hathway Cable & Datacom and Wincable and Subhash Chandra's Zee Telefilm's Siticable, have come together on a common platform and have decided to charge local cable operators a higher fee.

They have decided to evolve a common pricing mechanism and formulate a standard code of conduct after meeting last week in Mumbai. Their decision will apply across the country and marks an end to the fierce price wars that plagued the industry.

The big cable companies have also agreed to sign a no-poaching agreement. In essence, this means that they will not enter each other's turf.

"Talks are on and a final agreement is slated to be signed as soon as the finer points are sorted out," said Jagjit Singh Kohli, founder of Wincable.

Confirming that cable companies are banding together, Ashok Mansukhani, executive vice president-corporate services, Hinduja TMT, said: " With an increasing number of pay channels and hike in pay subscription rates, it has become necessary for us to be able to recover our money. The broad platform will also create some discipline. The move is also aimed at reducing unnecessary price undercutting owing to intense competition and will ensure transparency and bring about a systematic growth of the cable industry."

According to sources, the average cable price for subscriber would be in the range Rs 200-350 per cable household, almost double the present level of Rs 100-150 per subscriber. The rate will, however, will depend on the area and the paying capacity of subscribers.

The cable TV companies have also decided that the franchisee fee (paid by the local cable operator) will be at least Rs 100 a month per subscriber serviced by the franchisee cable operator, up from the current Rs 30 to Rs 80. The fee is paid to the cable TV company for providing the feed and physical infrastructure.

Star India and Zee Telefilms will benefit a great deal out of this. Star India has a 26 per cent stake in Hathway Cable and Datacom and also has significant interest in Wincable, while Siticable is a wholly owned subsidiary of Zee Telefilms.

With the cable TV companies now coming together, local cable operators will be forced to declare higher subscriber connections than they now do.

A key problem with the Indian pay TV market has been that the cable TV companies have fought to get control of local cable operators, to make sure that they gain maximum subscriber households in the hope of higher valuation (valuation multiple based on the number of cable connections in their franchisee's fold)," said Subhabrata Majumbder, senior analyst at Motilal Oswal Securities. " Local cable operators have in the past got away with high profits by playing one cable TV company against another. However, the picture is going to change substantially," he added.

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