Ortel Comes With an IPO, Interaction with Bibhu Prasad Rath, President & CEO of Ortel Communications

1) Why is your company different from other cable operators in tapping the markets?

- In a cable business in India, there is a business model which is called B2B MSO NCO business model. What the MSO does is, they lay the backbone and they handover the signal to the NCOs.  The entire activity is done by the NCOs. This is what we call a B2B model. Our business model is different from this, in the sense that we do not operate on the MSO NCO model. We operate on a complete B2C model. The entire network till the consumer point is owned and operated by our company. So, we are a business who generally does not need signals for redistribution. The business model is the last mile which is the B2C model. It has 2-3 unique advantages. On advantage is that you maintain the network quality and uniformity in a manner that you can provide government services on the same network. So, when you give multiple services to the same consumer, it always improves all the parameters. The broadband is growing, so that is your key advantage. The other advantage that you have other than this last mile is the whole thing of digitization. In analog what happens is, you are not able to cater to specific need of a consumer. So, you decide a packet which goes to all consumers. It is digital and addressable. The digital essentially increases your capacity and addressability gives you the technology where you can address every consumer’s signal. The whole idea behind this is that you can tear the services suiting to the requirement of each consumer. To implement this, you need to be consumer friendly. If you are operating through LCO, it becomes little difficult to address to the consumer needs. Since we don’t operate through LCOs largely, we have the whole thing in place in the sense that we have the customer database, customer application form, subscriber management system, call centre where individual consumers are able to talk to us. So this last mile actually helps to implement digitization in a right manner.

2) Do you have analog clientele because most of the people might be shifting to digitization?

- We still have analog clientele. Most of our markets are in Phase 3. We have some markets in phase 1 and phase 2 but the large part of our market is in phase 3. The phase 3 digitization deadline is now shifted to December 2015. We still have analog and digital and we still have time to move. We are one of the very few companies in the country who operate on a B2C model. The listed space will be the first one on the B2C consumer placing company. It is not selling the signal to LCOs. It is actually directly consumer placing with the last mile model which is capable of providing triple play, data voice, currently providing video on data. Over a period of next 15 months, all our other customers will shift to digital.

3) Is there any margin difference between analog clientele and digital clientele?

- On an average, the price with the digital customer space is generally higher than analog. The most important part is that we are very customer centric. Usually, as of now the price of digital consumer space is higher than the analog space. Around 11 per cent of my customers are now availing the broadband service and broadband is a different revenue generating unit and has its own economics. So if you are using the same network providing two services, it delivers you superior returns.

[PAGE BREAK]

4) Are there other customers also who are using only broadband?

- Yes, there are customers who only use broadband and there are customers who use only analog and there are some who use both.

5) If I am providing broadband service to only a broadband user, are the expenses higher because you need to lay the line etc. You mentioned that cable television can be used for all the three services. How much additional cost is required?

- The network is same. The same network and the same piece of cable will provide both TV as well as broadband services. So there is no extra cost in the network. There are consumer equipments. Like if you do analog TV, you don’t need anything. If you do digital TV, you need the set-top box. Similarly, if you go for broadband, you need a cable modem.

Talking about the company, we are a regional operator. We operate in the states of Odisha, Chattisgarh, Andhra Pradesh and West Bengal. We have a significant market share in the state of Odisha and we are emerging as a player in Chattisgarh, Andhra Pradesh and West Bengal which we started later on.

6) What amount of carriage fee do we generate?

- Since we are the last mile, we generate very steady revenue from the subscription. So our dependence on carriage fee is low. If you take carriage fee as a percentage of our total income, it is the lowest. So we are less dependent on carriage fee.

7) You have fiber infrastructure. You lend it to others? How does that happen?

- Apart from catering to the digital customers, one of our businesses is also infrastructure leasing. So the fiber infrastructure to some extent is also leased out to other players. 

8) How much of this contributes to our topline?

- My core business is retail, TV and broadband. We also have a very elaborate and strong back office processes to support the retail business in the sense that the execution team where the call centers, subscriber management system etc is there.

[PAGE BREAK]

9) The cable TVs are very capital intensive. A lot of small players have already entered the market. Do you feel that competing with them, at the cost which they are providing, is beneficial for us to still remain in the business? 

- We have grown both organically as well as inorganically. If you say organic, what you basically do is lay the infrastructure and compete with whoever is there in the market and start picking up the customers. The other thing which we do is, we also grow in inorganic manner where we actually buy out the LCO assets and the customer base. In many places what we do is, we negotiate with the LCO and buy out their assets and the customer base. So we do a deal with them that we give them a certain amount of money which is spread over a period of time and we buy out those assets and customer base and then we upgrade those networks and convert to our own last mile.

10) What about DTH? Even DTH is growing in the market.

- We do compete with DTH. There are a couple of advantages which cable has over DTH. One of the core advantages is that cable is an illusion of decentralized player. What you can do is, you can do the regional content which is extremely powerful in most parts of India. If you go to South-east and to some extent west, there is a regional content available in every state which cable is in a better position to cater. You can tailor your channel list suiting to the need of the customers of that region. In DTH, it is a pan-India platform. The other thing which we have is the door-to-door collection mechanism.

11) What is the major cause of raising funds from the market?

- Our growth strategy is: i) You expand the customer base through new geographies. We intend to expand in the instinct locations as well as new towns in the states of Odisha, Chattisgarh, Andhra Pradesh and West Bengal. We also have a plan to get into Madhya Pradesh but our primary focus is Odisha, Chattisgarh, Andhra Pradesh and West Bengal. So, one is you do the geographical expansion and you get more customers etc. The other thing is that the digital penetration which is today 13-14 per cent is going to go to 100 per cent. As a part of our growth strategy, what we also intend to do is to do a deeper penetration of broadband. Broadband is today 10-11 per cent. We also intend to buy out the LCO assets and customers. My idea is to buy out the last mile asset and upgrade/rebuilt and convert it to my own last mile customer so that I can give all the services to them.

12) If we take Chattisgarh, we provide service in all 13 districts which are in Chattisgarh or we are only in a few?

- Right now we are present in a few districts but we intend to expand in more places. Similarly is the case with Andhra Pradesh.