RJio eyes edging out SITI Cable, Bharti Airtel in cable and fibre play

Reliance Jio’s proposed acquisition of a 25 per cent stake each in digital cable companies Den Networks and Hathway Cable & Datacom will provide the telecom firm access to over 20 million subscriber homes, giving it an edge over Bharti Airtel and SITI Cable in the cable and fibre-to-the-home (FTTH) broadband markets.

The move will help Jio and its partners grab over 23 per cent of the cable market, leaving Subhash Chandra’s SITI Cable a distant second with a mere 13.4 per cent share. SITI Cable has 11.7 million customers across 580 locations, but it has been able to add only 250,000 broadband subscribers. The battle could get fiercer with Jio building up a content and broadcasting empire (with a majority stake in Viacom 18) as well as over-the-top platforms, just the way Chandra did with Zee.  

After Jio's deal with Den and Hathway, Airtel will be left far behind with 2.5 million fixed broadband customers, most of them still connected by copper in the last mile. However, it hopes to reach a 20-million addressable market in the next three years through fibre broadband, of which it expects 30 per cent will be hooked to its service. Airtel is also expanding its reach from 89 cities to 100 cities. According to sources, the board meetings of Jio, Hathway, and Den will be held on Wednesday to discuss the deal.

The companies would be issuing new shares to Jio in the respective operations, they added. An expert pointed out that based on the current market capitalisation of Den Networks, the value of the stake would be around Rs 5 billion, or around Rs 400 a subscriber, which is very attractive. This could be higher once the premium on the shares paid by Jio was known, the expert added.

For Jio, the deal makes immense sense. The number of broadband customers with Hathway and Den is just over 1 million. So there is a huge upside for bringing the remaining 19 million to the same service. This will help it more than triple the average revenue per user, as subscribers who used cable to only watch TV will now add broadband also. This will push the overall data revenues. Also, by entering these households, Jio could tap as many as 84 million individuals (generally there are more than four members in a household) through Wi-Fi to increase their data usage.

Second, the stake buy will help Jio roll out its services much faster than it would have anticipated. That is because between the two, they cover over 350 cities across the country, and they represent the bulk of the broadband market and three times more than that of Airtel. Without the deal, Jio would have had to get over the cumbersome task of seeking right of way (ROW) to lay fibre, which is not only time consuming, but is also very expensive as municipalities charge huge amounts to give permission.

With over 197 million households with TV in the country, according to the latest BARC survey, digital cable homes are still the largest with a 44 per cent share of the market, followed by direct to home, which is at 31 per cent, with the rest being divided among analog cable, terrestrial and free DTH.

Some analysts, however, say that unlike Jio, Airtel and the Essel group have followed a dual strategy -- it has put its bet on both DTH and fixed broadband, with the former addressing the needs of the lower and mid-end of the market (Rs 200-250 ARPUs) and the fixed broadband for premium customers with an ARPU of over Rs 800.