Hathway Cable’s standalone revenue at | 302.1 crore was lower than our expectations of | 321.8 crore. It incorporated IND-AS wherein activation income is now amortised over five year (expected average life of customer) and placement revenue is reported on net commercial transaction basis. Activation revenues, thus, came in at | 18.7 crore (I-direct estimate: | 27.5 crore). Cable subscription revenue was at | 107.7 crore, down 6.5% QoQ. Broadband subscription revenues were robust at | 99.8 crore, up 15.2% QoQ. Placement revenues came in at | 66.3 crore, down 6.9% QoQ. EBITDA came in at | 44.5 crore, with margins at 14.7% vs. our estimates of 19.2%, owing to increase in content costs and expansion overheads. Net loss came in at | 53.2 crore, vs. estimate of | 24.2 crore owing to a miss at EBITDA level, higher interest and depreciation expenses.

Outlook and Valuation: The management has guided for better monetisation in Phase I & II markets and Phase III monetisation by FY17E end. However, we highlight that MSOs continue to face difficulties in realising the full potential of ARPUs mainly due to non B2C nature of contact. Furthermore, we also believe Trai’s mandate to remove discretionary pricing between cable and DTH could prove negative for Hathway when implemented. While we like the company’s focus on growing its EBITDA accretive broadband business, the same is exposed to possible disruption from Reliance Jio. Owing to several uncertainties surrounding the cable space and Phase III monetisation still being delayed, we believe Hathway would continue to underperform the market. Therefore, we suspend our rating on the stock.