For almost one year, IndusInd Media & Communications (IMCL) has been an organisation in turmoil. Several senior executives have left the company, frustrated at the slow pace of growth of the multi system operator (MSO) business. The company has also trimmed the flab it had built when it wanted to introduce digital cable TV service at the time of conditional access system (CAS).

These have been tough times for MSOs who are caught between investments locked into CAS and the impending threat from direct-to-home (DTH) and IPTV (Internet Protocol television). They have been working out different strategies to mould their businesses into the future.

Hathway Cable & Datacom, for instance, is pushing for digital cable TV and broadband in a drive to have an integrated revenue stream. Zee Telefilms' Siticable, on the other hand, has taken up the additional task of laying part of the infrastructure for Dish TV while charting out a revival strategy through affiliate tie ups and the acquisition of Kolkata-based RPG Netcom. In Delhi, it is trying to cut out a deal with Spectranet which would give it the fibre backbone to centralise operations.

At Hinduja TMT, the parent company of IMCL, consolidation is no more the buzz word. A committee is masterminding various ways in which the media business can be demerged into a separate listed entity. Information technology (IT) will be the other listed company with mirror shareholding.

HTMT's reason: the new entities can achieve their individual business objectives faster and better.

So will cable TV distribution, film content and broadband businesses be merged? "A couple of alternatives are being discussed. It may involve multiple steps. But we haven't taken a final decision yet. Nor have we fixed a time frame," HTMT CEO and MD K Thiagarajan tells Indiantelevision.com.

Though Incablenet (the brand under which IMCL operates its MSO business) dominates the media business of HTMT, it still has not moved out of its net loss position. But Thiagarajan believes the subscription revenues will jump this year. "We will also see some growth in

cable TV," he says.

Incablenet has increased its content offerings on the digital system to 165 TV channels, the highest offered by any MSO in the country. Hathway offers 140 channels but has plans to scale it up. "With bandwidth choking on analogue systems, we feel subscribers who want more channels will buy our digital set-top boxes (STBs). We have not only upgraded our channel capacity but are also stressing on quality of service," says Incablenet chief operating officer Srinivas Palakodeti.

Incablenet has also reduced the price of its bundled package of digital STBs and cable modems to Rs 5,555, down from Rs 5,999. "It is over Rs 1,000 cheaper if the subscriber was to buy both independently," says Palakodeti.

Even this has barely helped Incablenet drive volumes and race ahead of competition. Palakodeti claims to have sold 10,000 digital STBs, which is well short of around 200,000 boxes the company has piled up. And Hathway has sold more STBs, with 15,000 boxes finding way into consumer homes. In an aggressive push, Hathway a few days ago introduced a combined package of STBs and cable modems at Rs 5,015, to be paid in a spread of 12 months.

Incablenet's main focus is Mumbai and, to a smaller extent, Delhi. The next destination is Bangalore. Hathway offers its digital services in three cities while plans are on to launch in Bangalore soon. "We are examining various options on how to reach Bangalore but plans have not been firmed up yet. We are looking at the optic fibre route that can hook up Belgaum and Mysore along with Bangalore. Or we may decide to install a digital headend to offer these services. But our focus this year will continue to be Mumbai where we have had the bulk of our sales," says Palakodeti.

Augmenting revenues from subscription is also on Incablenet's radar. Sources say the MSO is targeting an increase of Rs 240 million this fiscal. As a step in this direction, Incablenet has hiked the rate to the operator by Rs 30 a month to Rs 180.

Carriage or positioning fee has helped improve the company's health. Sources say Incablenet earned around Rs 120 million last fiscal, which could go up in the current financial year. Palakodeti declines to comment on this, but says this wouldn't help turn around the company. "In any case, this is a short term phenomenon. We are still in a cash loss situation as we have fresh expenses towards maintaining CAS. We also expect the payout to broadcasters, which was almost flat last year, to go up in the current fiscal because of the second pay bouquets," says Palakodeti.

Adds Incablenet executive director, corporate services, Ashok Mansukhani: "We have approached the Telecom Regulatory Authority of India (Trai) for a clear and transparent pricing as broadcasters in reality are bundling their bouquets. We are awaiting order. We are also disappointed that the government has not come out with any clarity on CAS so far. We want a road map laid out for CAS."

So how was Incablenet performed in 2004-05? Palakodeti refuses to reveal the figures at this stage, but says the company is still in losses (For 2003-04 results, see table).

IMCL Results

Incablenet has a reach of 4.5 million with a presence in 10 cities including Mumbai, Delhi, Bangalore, Ahmedabad, Baroda, Nashik, Nagpur, Hyderabad, and Mysore. The MSO has 65,000 direct points, the bulk of which are in Mumbai. It has a single centralised headend in each city, enabling it to streamline costs. In Mysore, it has a 48 per cent stake in United Mysore Network. A similar joint venture, USN, is in Bangalore.

"We are not expanding into new cities. We may decide to expand on the outskirts of cities," says Palakodeti.

Also on the agenda is reviving Indore where Incablenet has lost its cable TV presence. Bhaskar Multinet, the cable TV arm of Dainik Bhaskar, has made severe inroads and enjoys a dominant share in Indore. "We have a broadband service through our fibre optic network. We plan to revive our cable TV presence in that market soon," says Incablenet president Manoj Motwani.

With a stable price market, collections have improved. Income from cable Internet, which is run by a separate company, has not gone up much, as severe competition has undercut prices. "Cable broadband has just scratched the surface. Unless unlicensed Internet operators are weeded out, it can't take off in a big way. We are in the process of integrating the marketing operations with Incablenet. On the digital platform, we expect our broadband revenues to increase. We are also examining the option of whether we can buy bandwidth in bulk and drop the rates to get in more customers," says Mansukhani.

Early in the year, Incablenet brought in Deepak Varma as the CEO. But barely two months into the job, he quit the company. Coming from a telecom background, he could not adjust to the complexities of the cable TV industry. "The industry operates in a way that is not in sync with the understanding that I have had with my past job experiences," Varma, who had earlier served as COO of BPL Mobile Communications Mumbai, told Indiantelevision.com, after resigning from Incablenet.

Palakodeti, who was chief financial officer, will face the tough challenge of negotiating with broadcasters on pay channel rates, handling cable operators, and selling more digital services. But, as Mansukhani says, "Dynamic growth of MSOs will come only with CAS."