Ortel Communications Limited (Ortel) is a cable tv & high speed broadband service provider rendering its services on a two way communication network for “Triple play” services (video, data and voice capabilities). The business is broadly divided into (i) cable television services comprising (a) analog cable television services; (b) digital cable television services including other value added services such as HD services, near video on demand (NVoD), gaming and local content; (ii) broadband services; (iii) leasing of fibre infrastructure; and (iv) signal uplinking services.
Ortel currently offers services in 48 towns and certain adjacent semi urban and rural areas with over 21,600 km of cables supported by 34 analog head-ends and five digital head-ends. It uses HFC (combination of optic fibre in the backbone and coaxial cable in the downstream) to build its network. The company serves both retail and corporate customers.
It has roughly 500,000 retail subscribers for analog cable television services, 90,000 retail subscribers for digital cable television services and 70,000 broadband subscribers including 120 corporate customers with provisioned bandwidth of 806 mbps adding up to a total of 526,551 RGUs. The company has grown both organically and inorganically through sale of its services directly to the cable television subscribers and buyout of network equipment, infrastructure and subscribers of other LCOs.
Ortel does a turnover of 200 crs, clocks an operating profit of avg 22%, but interest on debt (of 200 odd crores) coupled with depreciation leaves just a paltry net profit. Broadband ARPU is Rs 320/-
Now, why would anybody be interested investing in Ortel when the giant Jio is the future?
Firstly, Ortel is different from Den or Hathway. Den / Hathway and the likes depend on the Local Cable Operator (LCO) for servicing their subscribers, and most of the time the loyalties of the LCO may change for various reasons. However, Ortel lays its own cable, buys out the LCO and services their customers directly ie it has its own last mile network! That means they are a fully integrated player and are customer facing. Also, synergies to cross sell products among customers.
Secondly, they dominate in Odisha and have presence in Chhattisgarh, Andhra Pradesh, Telangana & West Bengal. Many parts of these states have the threat of naxalites and laying new network lines in these areas is not very easy or do-able. Hence Ortel could be a candidate for a potential buyout.
Thirdly, Ortel came out with its IPO at a price band of rs 160-200 in 2014-15. Nothing drastic has changed, except for its price now available at Rs 30/- extremely tempting!
Here you have a company owning its last mile network, with a net worth of 140 crores, trading at a market cap of below 100 crores, a fully integrated play servicing its own customers in urban, semi urban and rural areas, in a country where everything is getting digitized. Company could be direct beneficiary for better rural & semi urban incomes.
Views more than welcome.
Disc: invested a small amount, looking for more conviction!