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A US$100 Million Cushion For Siti

Promoters in Siti Cable, India’s third largest MSO by subscriber numbers, are putting another US$100 million into the network, mostly to reduce debt at a time when cable business models are coming under increased financial pressure.

Siti, like other Indian MSOs, has borrowed heavily to buy and install digital set-top boxes to meet ongoing cable digitalization deadlines set by the government.

External investment for India’s cable sector has dried up, however, as operators have been slow to develop new revenue streams – in potentially promising areas such as broadband and premium content  to recoup their investments.

With cable Arpus stagnating, other distribution platforms such as DTH and OTT present a more enticing growth story.

Additional capital from Siti’s promoters, which will raise their holdings from 64% to 72% once the transaction goes through, signals confidence in the MSO’s long-term prospects.

Promoters of other national MSOs such as Den and Hathway own smaller slices by comparison.

A lighter debt load, meanwhile, could help Siti attract third-party investors in the future.

The company is faring well, reporting its first net profit, of Rs560 million (US$8.3 million), in its Q3 results reported this week.

Ebitda also jumped 159% year-on-year, to reach Rs1.3 billion (US$19 million) for the quarter.


The next few years will be heavy going for Indian cable operators, juggling government demands to complete its national digitalization program with the need to start generating returns from existing digital households.

So far, Siti has seeded digital boxes in about 5.5 million homes out of a 10.7 million strong subscriber base covering 130 cities.

At the same time, a powerful new competitor – Jio, a multi-billion dollar video and broadband enterprise backed by India’s biggest private company, Reliance Industries – is gearing up to launch, expected around the middle of this year.

“Siti promoters are showing commitment and want to improve the balance sheet,” remarks Mihir Shah, VP of India for research and consulting firm, Media Partners Asia.

“For the next three years, and with Jio around the corner, cable’s overall business economics – including the broadband business, which for most is doing quite well – will be under a lot of pressure,” Shah adds.

Siti promotors plan to devote around 90% from its latest fund raising to pay down debt, although 10% – about US$10million – is being used for acquisition, including bigger stakes in associate companies and JV partners.

The largest investment is 76% of Mumbai MSO Scod 18, strengthening Siti’s presence in western India to complement current strongholds in the East.

Siti is part of Essel Group, which also includes DTH operator Dish TV and broadcast major Zee.

[Update: Siti's board also approved a proposed JV with Dish for joint content and carriage negotiations, after presenting the cable company's Q3 results.]

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