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Wire & Wireless Limited
Quarter One Earnings Conference Call – Financial Year 2008-2009
July 25, 2008
Moderator: Good evening ladies and gentlemen. I am Sandhya, the moderator for
this conference. Welcome to the Wire & Wireless Limited Conference
Call. For the duration of the presentation, all participants’ lines will
be in the listen-only mode. I will be standing by for the question and
answer session. I would like to hand over to Mr. Hitesh Vakil. Thank
you and over to you sir.
Hitesh Vakil: Good afternoon and good evening ladies and gentlemen and thank you
for joining us today to discuss the results for the first quarter ended
June 30th 2008. We do hope that you had a chance to go through the
earnings release and a copy of the results which is uploaded on our
website www.wwil.net. To discuss the results and performance,
joining me today from a conference room in Mumbai is Mr. Subhash
Chandra, Chairman; Mr. Sanjay Jain, CFO, Essel Group; and member of
senior management team of WWIL, Mr. Deepak Chandnani, Chief
Executive Officer; Mr. V. K. Agarawal, Head of Merger and Acquisitions;
Mr. Vivek Goel, CFO. We will start with a brief statement from Mr.
Chandra on the first quarter performance and then we will open up the
discussions for question and answers. I would like to remind everybody
that anything we say during this call that refers to our outlook for the
future is a forward-looking statement that must be taken in the context
of the risk that we face. With this, I now hand over to Mr. Chandra.
Subhash Chandra: Thank you Hitesh. I would like to welcome everybody to this call ladies
and gentlemen. We appreciate you joining us for the first quarter
report of financial year 2009. The summary results for the first quarter
of the financial year 2008-2009 is like this. The consolidated operating
revenues stood at 716.2 million for the first quarter as against 615.9
million during the corresponding quarter last fiscal recording a growth
of 16.3%. This growth is led by a 27.5% growth in subscriber-related
income, Q1of FY09 654 million and Q1 of FY 2008 was 513.3 million.
The total consolidated operating expenses stood at 715 million for the
first quarter ended June 30th 2008 as against 689 million during the
corresponding quarter last fiscal. Major cost component was cost of
goods and services recorded at 526.7 million during the quarter
representing 73.6% of the total operating expenses in comparison to
521 million in the first quarter of last fiscal, which was a 75.6% share of
the total operating cost. We have made a consolidated operating
profit before depreciation of just under a million rupees, which was the
loss of 73.8 million in the corresponding quarter last fiscal. Some of
the key industry developments are the followings. The industry
growth, the cable and satellite home growth in India is 18% per annum.
We believe that rising disposable income, increased spending on
nonfood and essential items will improve and also with the
improvement of the quality of television and better quality offering of
services, that will be the key demand driver for the cable industry.
Voluntary digitalization of the cable is gradually increasing as the
consumers are getting aware of the advantage of the digitalized
quality, picture on their television sets rather than so far the analogue
quality. Also, added with that are the electronic program guide,
parenteral locks, and more number of channel availability, and
selection of channel what they want to watch and they don’t want to
watch and so on and so forth. The “Headend in the Sky” has come to a
reality. We are the first MSO to deliver digital service through Headend
in the Sky platform in India. It has been launched on a trial basis with
successful installation of close to 50 receiving units in India, and we
would soon be doing a commercial launch of this channel throughout
the country and more particularly for the time-being for the
conditional access areas or the high-end conditional access areas
because of some consideration with the programming companies. This
will significantly bring down our cost of capital for a country-wide
rollout and would have better control and revenue generation on this
platform rather than the analogue cable business. I must touch upon
the conditional access regulatory issues. TRAI has recommended
extending the CAS fully to these three cities (Mumbai, Delhi and
Kolkata) and plus next 55 cities, but the Ministry of I&B has not yet
taken decision on this. However, as I have been saying earlier in our
one-to-one meetings and in other forums that the digitalization of the
delivery mechanism through platforms like DTH, etc., will
automatically force the cable industry also to go digitized. Now, I will
come back to our quarter’s performance results, we believe that our
ability to handle large cable network, digital cable services and launch
a movie on demand kind of service and broadband services provide a
compelling value proposition for viewers which will bring dividends to
the shareholders and other stakeholders in days and months to come
in. With this, I would like to hand over the floor back to Hitesh for
opening the floor for questions and answers. Thank you very much
ladies and gentlemen.
Hitesh Vakil: So, ladies and gentlemen, we are ready for the questions now, but
before that, I would like to request all participants to please limit
themselves to two questions so we get as many people as possible.
Sandhya…
Moderator: Thank you very much sir. We will now begin the Q&A interactive
session. Participants who wish to ask questions, please press *1 or 01
on your telephone keypad. On pressing *1, participants will get a
chance to present their questions on a first-in-line basis. Participants
are requested to use only handsets while asking a question. To ask a
question, please press *1 and 01 now. I repeat, participants who wish
to ask questions may kindly press *1 and 01 now. First question comes
from Mr. Bhanu from Quantum Securities. Over to you sir. Mr. Bhanu,
please go ahead with your questions. As there is no response, we will
move on for the next question. Participants who wish to ask questions
may kindly press *1 on the telephone keypad. At this moment, there
are no further questions. Please go ahead sir.
Moderator: We do have a question coming up from Ms. Tanu from Quantum
Securities. Over to you ma’am.
Ms. Tanu: Hello, this is Tanu from Quantum, Sir, could you break up the 654 odd
million subscriber related revenues between carriage fee and your
subscriber-related revenues.
Subhash Chandra: We are not giving breakup Tanu on this.
Ms. Tanu: Okay, alright. Can you disclose the subscriber numbers at least for
analogue, the paying subscribers or digital or whatever you are willing
to disclose on the subscriber number sir.
Deepak Chandnani: On analogue, total reach about 6.7 million subscribers. The paying
subscribers are typically in the range of 15% to 17% of the total
depending on city to city. And if you take our total paying subscribers,
they add up to roughly a million including our digital subscribers.
Ms. Tanu: And any views on ARPUs, can you disclose anything on that front?
Deepak Chandnani: As far as ARPUs are concerned, in the digital space, we have seen a
steady increase of ARPUs quarter on quarter. They are now at about
4% to 5% per quarter in terms of ARPU increase.
Ms. Tanu: What are the absolute ARPUs for this quarter in digital if you could tell
us…
Deepak Chandnani: The absolute ARPU in this quarter is 95 rupees for the pay channels.
Ms. Tanu: Okay.
Deepak Chandnani: As you are aware, the customer also pays in addition to this 77 rupees
for FTA channels and also pays rental and taxes
Ms. Tanu: Right.
Deepak Chandnani: So, customer actually is paying about 250 rupees on the average for
digital cable TV now.
Ms. Tanu: Okay. And whosoever is paying on to the analogue side, what would be
the ARPUs, if you could tell us.
Deepak Chandnani: Typically analogue ARPUs are in the 180 to 220 range. They vary quite
a bit from city to city.
Ms. Tanu: Okay.
Deepak Chandnani: But that is the range there.
Ms. Tanu: And something on to the equity side because that was negative, can we
expect something, any equity raising going to happen…
Subhash Chandra: Yes, it is being worked upon.
Ms. Tanu: Alright. I have more questions, I will come back later.
Subhash Chandra: Thank you.
Moderator: Thank you very much ma’am. Next, we have Mr. Prathap from SSKI.
Over to you sir.
Female Speaker: Yeah sir, I just wanted to ask you about your current debt levels and
the carriage fees that you currently have.
Subhash Chandra: Well, carriage fees number we are not giving. Our current debt levels…
Deepak Chandnani: 240 crores is the current debt level.
Female Speaker: 240 crores. Okay sir, thank you.
Moderator: Thank you very much ma’am. Participants who wish to ask questions
may kindly press *1 on the telephone keypad. Next in line, we have
Ms. Tanu from Quantum Securities. Over to you ma’am.
Ms. Tanu: This is Tanu again. Could you give a guidance for FY09 in terms of
revenue growth and when can we expect to break even?
Subhash Chandra: Well, breakeven of this Company is expected in 2011, not before
because we are currently in investment mode, but for FY09, we are
looking at 375-400 crores of top line.
Ms. Tanu: Okay. And sir, lastly, anything on Triple Play?
Subhash Chandra: We are keeping in digital area all Triple Play
Deepak Chandnani: If I can just add to what the Chairman said, in Bangalore, we already
have our internet offering, broadband internet offering to our
customers.
Ms. Tanu: Okay.
Deepak Chandnani: In addition, we are planning this quarter to also launch in Mumbai and
thereafter take it forward to other cities. As you know, voice is not
allowed as of now within the country, but both video, which is TV and
internet, we have already started offering and we will continue to
offer.
Ms. Tanu: Okay. And…I don’t know if I can ask this, but last quarter I couldn’t log
in, there was this exceptional loss that, you know, you had booked,
could you elaborate on that, can we see it this year going forward also,
there is nothing on to that side this quarter, you know, some 795
million.
Deepak Chandnani: As we mentioned last quarter, basically that was a one-time write-off
of loans that had gone through that we had given to various companies
who were rating us in the distribution of our services. It was a one-time
write off which came from previous years and as we had mentioned last
quarter, we don’t expect any more of that to happen and that is what
you see this quarter and you will see going forward.
Ms. Tanu: Okay, I am done. Thank you so much.
Moderator: Next question comes from Ms. Avneesha from Prime Securities. Over to
you ma’am.
Ms. Avneesha: Sir, what is the CAPEX expected for this year?
Subhash Chandra: The total CAPEX which we have planned is addition of another 1100
crores over the next 2 to 2-1/2 years.
Ms. Avneesha: And how is it expected to be funded?
Subhash Chandra: Both debt and equity. We are contemplating rights issue for this
Company and almost 50% debt and 50% equity.
Ms. Avneesha: And this level in net gross, does it include for HITS as well or it is only
for…
Subhash Chandra: Yeah, for all running our businesses, majority of which will be for the
set-top boxes and things like that.
Ms. Avneesha: Okay sir. Thanks a lot, that’s it from me.
Moderator: Thank you very much ma’am. Next question comes from Mr. Ram
Patnaik from Religare Securities. Over to you sir.
Ram Patnaik: Good afternoon sir. I just wanted to hear your comments on the recent
TRAI recommendation of, you know, taking cables, analogue cables to
digitize the whole thing in the next five years, what is your comment
on that sir.
Deepak Chandnani: We are actually very pleased that the whole cable business and TV
business is moving through the digital format. And we would, of course,
like it to happen even faster. Our endeavor is to make it happen as
quickly as we can which is why we are launching HITS. Through that
process, we will be hoping to expedite digital conversion on a voluntary
basis. So, we are delighted with the move to push this industry into
digitization and more organize it.
Ram Patnaik: You think it is going to happen before five years, it should happen, I
mean, what will be time duration you think when it will complete the
conversion of analogue to digital you think sir.
Subhash Chandra: Complete conversion is difficult to say, but you see it is a compulsion
of the cable industry to get itself digitized. Otherwise, it will start
losing the customers. Today, the industry is not feeling it because
there is an overall growth of 18% in the cable business and DTH is
taking not…not all of the 18%. So, cable industry is not feeling today,
but soon they will start feeling it, but I would say you should take it by
2015 there will not be any analogue delivery in this country.
Ram Patnaik: Okay sir, thank you.
Moderator: Thank you very much sir. At this moment, there are no further
questions from the participants. I would like to hand over the floor
back to Mr. Hitesh Vakil for the final remarks.
Hitesh Vakil: Thank you all for joining us. We hope to have a transcript on the call
very soon on our website www.wwil.net. We will look forward to
speaking to you again at the end of second quarter of fiscal 2009 or
even earlier on one-on-one basis. Thank you and have a great day.
Moderator: Thank you very much sir. Ladies and gentlemen, thank you for
choosing WebEx Conferencing Service. That concludes this conference
call. Thank you for your participation. You may now disconnect your
lines. Thank you and have a nice day.
Note:
All revenue figures in INR until otherwise mentioned
1 Billion= 100 Crores
1 Million= 10 Lacs
1 Cr= 100 Lacs
