Hathway Cable & Datacom - Cyclical upturn for BroadBand provider?

Thank you @Uservijay for highlighting, I didn’t knew that its not Jio’s website, although recent updates on this website are pretty accurate.
I agree that these may not be a real tariff, and tariff could be changed anytime.

JioFiber recent commentary:

"JioFiber has already been launched in select markets across the country. It currently offers fibre-to-the-home (FTTH) broadband connections with 1.1TB (terabytes) of free data at a speed of 100 mbps.

Last month, Reliance Jio secured a $1-billion worth of term loan from a slew of foreign banks led by ANZ Bank and HSBC and covered by the Korea Trade Insurance Corporation (K-Sure) to finance its procurements from Samsung and Ace Technologies."

As I understood from the commentary (1.1TB/month is not for a normal user, it’s really hard to even consume 200GB a month) it does look like that JioFiber is targetted towards the premium segment, where Hathaway is mainly having mid-APRU customers(avg is around ~750).

Moreover, free fiber connection is a costly affair, I don’t think it will last as long as Mobile freebies lasted, in case of mobile losing a customer who just came in for freebies cost very less(Cost of SIM card is in pennies), whereas in case of fiber installation costs are quite high, and it won’t make sense to acquire a customer who would not want to pay later, hence I think freebies won’t last longer.

Rest I would still wait for the Churn & ‘New Subscription’ number’s over next few quarters along with Jio’s Tariff in order to decide further.

Actually in my honest opinion, Jio is targeting lower than Hathways’s ARPU and is expected to start at 450 or even lower. Airtel is adjusting it’s subscription to match Jio and is offering cheaper plans. Jio is not going to be premium niche product. On the contrary, it will be a mass market value product .

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Sorry about a Rookie question, what does “trading at replacement” cost mean?

It means that if you have to create Hathway now what would it cost you to build it. For instance laying the fiber optic fiber in so many cities.etc. There are multiple ways you can calculate replacement cost.

This has been completely whacked out of shape. Few months back Kenneth entered @39 and it has lost 50% already. All MSOs are making losses and if one goes by the concalls, they were supposed to breakeven in their cable biz this year. TRAI tariff order for cable sector is positive and they were expected to reap rewards from this year onwards. Incidentally, Hathway’s broadband biz is profitable for sometime.

I have talked to few senior folks in this MSO industry and they have an opinion that no one can capture all broadband market not even Jio. Setting up 4G was relatively easy but setting home broadband is very time consuming and problematic. Customer acquisition cost is high and churn is also high. What might happen is that some of the smaller MSOs will simply become franchisee of Jio or close down. The larger ones will have to merge and become large enough to survive and thrive. They can no way challenge Jio alone. This is not 2G/3G/ or even 4G where smaller competitors will simply surrender. There will be bloody war for customer homes as we go ahead. I will wait for consolidation in the MSO sector before considering it.

RJ has made a good move by entering Dish TV which has 37% marketshare of DTH which will also be a big beneficiary of new tariff order while remaining relatively insulated from Jio’s killing spree.

DIsc: No holdinhg

OBCM-Cable TV’s Amazon Day!-July 2018.pdf (125.7 KB)
Attached is Kenneth Andrade note on the sector.

Is anyone tracking the company’s / sector closely now that prices have corrected 40-50% in past few days. Market is pricing like Jio is going to be the only player who’s going to be around in future. Share you views.

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Jio has shown its war muscle in 4g war fighting with giants like Airtel and Vodafone, compared to whom Hathway, Den etc are pygmies. If jio aggressively targets for marketshare, I doubt these players have the deep pockets to defend it. May be markets are also thinking in similar lines.

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I agree reliance is biggest threat . But that does not mean one cannot survive them. The only way Hathway can survive the muscle power is to create a niche for its with better customer experience and niche offering. Reliance even though has lot of money it disposal they will take time to expand. Even though you have lot of money you still take time build roads . The market in broadband is at very nascent stage and this market is going to expand as more devices in the house needs to be supported by internet. As compared to US the broadband business currently is small. So Hathway has enough room to grow their customer base. Instead of dish tv i would bet on Hathway as they been trying to better their customer experience and thats pretty evident based on their focus fiber broadband . Based on the conference call Rajan has been stating their focus has been improving customer experience rather than competition . I too believe that is only way to survive in David vs Goliath battle is to create a niche for yourself and better customer experience. I have seen Hathway has taken few steps in this direction.I would bet on Hathway TV as fiber optic broadband is the future and Hathway has put effort in improving its customer experience. I agree with Kenneth there will more than one player in the broadband and it cant be a monopoly business.You never know tomorrow someone with same muscle power as reliance may fund Hathway.

Views may be Biased

Disc: Invested.

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They all say that one should invest in a business that has moat. What moat does Hathway have? Even if it had, hasn’t the moat weakened substantially after entry of superpower Reliance.

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They have entered into a streaming partnership with Netflix recently. That is why the market is rewarding the stock last 1-2 weeks.

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RIL in talks to acquire Hathway cable, looks good news

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Proposed preferential allotment of 2940cr @ 32.35900dffa2-a410-40ce-9845-c03b0b38e832.pdf (387.6 KB)

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Now what impact Hathway could get by this offer???

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One major challenge for Jio FTTH has been the last mile connectivity. I have reliable reports that in south Mumbai, they are not getting cooperation from landlords and others to do the connections.
Jio has seen this problem and the only option is to somewhat 'piggy back’on those who already have the connectivity.

Now, how does this help Hathway? Do they get a cut? If yes, they probably will just focus on doing the last mile connectivity instead of providing Internet services.

Just one more note (based on practical experience). Competitors are generally known to cut each others cables and disrupt services of their customers in order to generate negative perception of reliability. So, in many areas, local operators, if not onboarded, will cause trouble to the big players. Jio knows this and trying to bring these guys on its side, I suppose.

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I guess this may sound offtrack but how good a consumer oriented company is decided by its customer service. Search the internet especially about Hathway broadband. You will find hundreds of complaints about unethical behavior on part of the company by its customers. I guess that speaks volumes about the company & its management.

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I will disagree with you on this and service level depends on area to area. People mostly leave reviews only when they are not satisfied. My family is using Hathway from last 12 years and we have multiple connections. Service is top notch in my area. Uptime is more than excellent, I get connected to the customer support in a minute and technician visit my place in less than 2 hours to sort any issues. But I have never left any review for any service where I am satisfied. I have took time to write a review only when I am dissatisfied.

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I don’t like this stock at all. They’re operating at a loss even before Jio has reached everywhere. They aren’t expanding into a country with a lot of penetration power, they’re sales and growing but their losses are increasing. Their ROCE is laughable (-0.26%), and their scope is limited.

Although Jio does own around 65% of the company, this company has as much of a chance of expanding its market share as Machine Gun Kelly has of outselling Eminem.

Don’t like the product, don’t even like the stock.

There was a time where Hathway broadband was the best thing on the market. But now times have changed, they aren’t spearheading premium internet anymore.
Scope seems weak.

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Market cap is 3900 CR, is it a value trap ?

I’ve been tracking this for sometime. Company seems to have a strong balance sheet. In fact, if you analyse the net cash position of the company (including investments), it seems to have almost Rs.10 cash against each outstanding share. So considering that the CMP is around Rs.20, you’re getting to buy the business at just Rs.10. That’s a throw away price in my view.

Whether it’s a value trap? Only time will tell I guess.

I feel however that it’s a solid business. Wired broadband in India is highly under penetrated. There are less than 2.5 cr. wired broadband connections in India. This number is abysmally low and should go up by about 10 times over say 10 years.

These existing 2.5cr connections are split between BSNL, Jio, Airtel, Act fibrenet and Hathway. I think it’s also fair to assume that BSNL will keep ceding market share in favour of the private players.

Things I dont like about the company are that it has too many subsidiaries and condequently lots of related party transactions. Also, since the company is now effectively controlled by the Reliance Group, it’s quite possible that Reliance may divert the company’s existing business over to Jio. Though that would be unethical since it would short change the minority shareholders in Hathway.

Any other views will also be appreciated.

Disclosure: Invested

The problem i find with this company is, once Reliance acquired it, they put it aside without using it properly, its book value is 23rs a share but it is trading at 13 rs, which I feel terrible. They have the resource to make it big but they aren’t will to act, that’s the big problem.

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