BENGALURU: After the roll in of the Jio juggernaut, things have never been the same for the Indian broadband internet services industry.  It’s déjà vu - Den Networks Ltd (Den) reported lower subscription numbers for its fixed broadband business for the quarter and year ended 31 March 2019 (Q4 2019, FY 2019, quarter and year or fiscal under consideration) as compared to the previous years. Placement income also fell in FY 2019 as it had in FY 2018 when compared to the previous years. Den had seen an increase in its Activation Income in fiscal 2018 as compared to FY 2017, however, placement income dropped in 2019 as compared to FY 2018.

The good news is that the company’s fortunes are likely to change, now that Reliance Industries has taken over management control by equity acquisition through its various ‘Jio’ companies and announcement of ‘Ftth’. During Q4 2019, Den allotted, on preferential basis, equity shares to the extent of 58.98 percent to three companies from the ‘Jio’ stable - Jio Futuristic Digital Holdings Private Ltd, Jio Digital Distribution Holdings Private Ltd and Jio Television Distribution Holdings Private Ltd. As on 31 March 2019, the aggregate holding of the acquirers' group in Den stood at 78.62 percent of the total paid-up equity share capital of Den.

Consequent to this, Den’s share capital has increased to Rs 477 crore in FY 2019 from Rs 195 crore in FY 2019. Reserves and surplus has increased to Rs 2,069 crore from Rs 589 crore, with cash and cash equivalents going up to Rs 2,296 crore in FY 2019 from Rs 384 crore in the previous year.

Now onto the company’ performance for the year under review based on an investor presentation dated 16 March 2019 for Q4 2019 and FY 2019.

Consolidated income for the year under consideration declined 6 percent to Rs 1,207 crore from Rs 1,286 crore in FY 2018. Consolidated EBITDA fell 36 percent in FY 2019 to Rs 183 crore from Rs 284 crore in the previous year. The company’s net loss for the year reduced to Rs 181 crore from a net loss of Rs 203 crore in FY 2018.

Consolidated Placement income in FY 2019 declined 9 percent to Rs 313 crore from Rs 345 crore. Consolidated Activation income declined 16 percent in FY 2019 to Rs 100 crore from Rs 119 crore. Consolidated Other operating income declined 33 percent to Rs 55 crore from Rs 82 crore.

Den’s consolidated Total Expenditure for FY 2019 increased 2 percent to Rs 1,024 crore from Rs 1,003 crore in the previous fiscal. Content costs increased 6 percent to Rs 573 crore from Rs 540 crore. Personnel costs declined 9 percent in FY 2019 to Rs 96 crore from Rs 106 crore. Other operational expenses declined 2 percent to Rs 331 crore from Rs 324 crore. The company has provided Rs 31 crore for doubtful debts in FY 2019 as compared to Rs 26 crore in FY 2018. Consolidated Finance costs declined 9 percent to Rs 59 crore from Rs 65 crore.

It must be noted that the company has indicated exceptional items costs to the extent of Rs 211 crore for Q4 2019 and FY 2019 in its investor update as per its following explanation: In view of the New Regulatory Framework for Broadcasting & Cable services sector notified by the Telecom Regulatory Authority of India (TRAI), which has come into effect during Q4 2019, resulting in changes in pricing mechanism & arrangements amongst the group, LCOs, broadcasters and consumers; the group has recognised provision for impairment of trade receivables and property plant & equipment including set top boxes amounting to Rs 184.60 crore. Additionally, one-time exceptional provision has been recognised for certain tax-related matters and other assets amounting to Rs 26.50 crore.

Segment numbers for FY 2019

Den has two main segments or businesses – television cable (cable) and fixed broadband internet (broadband).

Den’s subscription income from Cable business increased 1 percent to Rs 673 crore from Rs 667 crore. Cable Activation income declined 15 percent in FY 2019 to Rs 99 crore from Rs 117 crore. Consolidated Placement and Other operating income numbers mentioned above have been for Den’s Cable business. Cable EBITDA declined 36 percent in FY 2019 to Rs 182 crore from Rs 284 crore. Cable business reported a loss of Rs 258 crore in FY 2019 from its Cable business as compared to a profit after tax of Rs 16 crore in FY 2018.

Cable Total Expenditure for FY 2019 increased 3 percent to Rs 957 crore from Rs 927 crore in the previous fiscal. Content costs increased 6 percent to Rs 573 crore from Rs 540 crore. Personnel costs declined 9 percent in FY 2019 to Rs 86 crore from Rs 94 crore. Other operational expenses remained flat at Rs 268 crore. The company has provided Rs 31 crore for doubtful debts for its Cable business in FY 2019 as compared to Rs 26 crore in FY 2018.  Cable business finance costs declined 12 percent in FY 2019 to Rs 57 crore from Rs 65 crore. Provision for tax in FY 2019 increased to Rs 13 crore from Rs 10 crore in FY 2018.

Broadband total income declined 11 percent in FY 2019 to Rs 67 crore from Rs 75 crore. Broadband subscription income declined 10 percent in FY 2019 to Rs 66 crore from Rs 73 crore in the previous year.  

Broadband Total Expenditure for FY 2019 declined 12 percent to Rs 67 crore from Rs 76 crore in the previous fiscal. Personnel costs declined 31 percent in FY 2019 to Rs 9 crore from Rs 13 crore. Other operational expenses declined 10 percent to Rs 57 crore from Rs 63 crore.  The company has reported a steady increase in ARPU (net after tax) after the drastic fall to Rs 552 in Q1 2018 from Rs 565 in Q4 2017. ARPU’s (net after tax) for Q2 2019, Q3 2019 and Q4 2019 were Rs 554, Rs 559 and Rs 562 respectively. Broadband subscriber base increased by 9,000 in FY 2019 to 1,16,000 from 1,07,000. In Q1 2019, Den had a fall of 1,000 subscribers.