GTPL Hathway Limited (GTPL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the GTPL Hathway Q2 FY '20 (sic) [ FY '21 ] Earnings Conference Call hosted by IDFC Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rohit Dokania from IDFC Securities Limited. Thank you, and over to you, sir.

Good afternoon, everyone, and welcome to the Q2 FY '21 Results Conference Call of GTPL Hathway Limited. We at IDFC Securities would like to thank the management for giving us the opportunity to host this call. GTPL Hathway Limited's management will be represented by Mr. Anu bhai Jadeja, Promoter and Managing Director; Mr. Rajan Gupta, Chairman and non-Executive Director; Mr. Piyush Pankaj, Business Head, CATV and Chief Strategy Officer; Mr. Anil Bothra, Chief Financial Officer; and other senior management persons. We will start the call with a brief commentary from the management and then move into the Q&A. Thank you, and over to you, sirs.

Thank you, Rohitji. Good evening, everyone. A warm welcome to all of you to the conference call of GTPL Hathway Limited to discuss financial and operational performance, quarter 2 FY '21. GTPL Hathway continues to deliver on key KPIs. The highlights of H1 FY '21 performance was strong profitability, debt reduction, geographical expansion and strong operational performance. During the first 6 months of the current year, we have reduced our gross debt by INR 440 million as on September 30. Our seeded set-top box stood at 10.4 million and paying subscribers stood at 7.3 million. Our broadband business has gained momentum, and we added 1,30,000 broadband subscribers during H1 FY '21. We are #6 private wireline broadband company in India, offering high-speed and truly unlimited data. We are looking forward a strong H2 FY '21, coupled with -- planned with launch hybrid box in coming months. With that, I hand over to Mr. Piyush Pankaj, who can take you through the business and financial aspect of GTPL Hathway. Piyush?

Thank you, Mr. Jadeja. Good evening, everyone. I hope all of you are safe and healthy. GTPL Hathway is one of the few consistently profit-making cable TV and broadband companies in India. Our business model is quite robust and can explore multiple growth opportunity that this sector has the potential to offer. In the last 4 years, our subscriber base has grown exponentially by 1.7x from 4.2 million quarter 2 FY '17 to 7.3 million in quarter 2 FY '21. During the same period, our revenue and EBITDA has grown by 22% and 18% CAGR, respectively. We have been consistently generating free cash flow since FY '16 and have managed to reduce net debt to INR 340 -- INR 3,419 million in the last 4 years and had returned money to shareholders in the form of regular dividends. I believe with such strong fundamentals, we are ready to pursue the next phase of growth, which has already been put in motion. As on September 30, 2020, active and paying subscribers in cities stood at 7.85 million and 7.30 million, respectively, an addition of 100,000 subscribers as compared to quarter 1 FY '21. GTPL's retail CATV services reached 800-plus towns spread across 13 states in India with Tripura being the latest addition. Our CATV business expansion in Maharashtra, Tamil Nadu, Andhra Pradesh, Telangana and Tripura is on track and will gain momentum in the coming quarters. The wired broadband sector has witnessed a surge in demand. This increase is more specifically contributed by the households to enable e-learning, work from home, entertainment, digital payments, et cetera, and other digital activities. In the broadband segment, during quarter 2 FY '21, we added 2,10,000 new home passes and taking the total home pass as on September 30, 2020, to 3.72 million. During the quarter, GTPL added 80,000 net broadband subscribers, with the total net broadband subscribers as on September 30, 2020, to 5,35,000, of which 1,60,000 are FTTX subscribers. The data consumption as on September 2020, stood at 195 GB per month, up by 55% Y-o-Y. Broadband ARPU for quarter 2 '21 grew by 4% Y-o-Y at INR 430 per month. On our EPC business, we have connected 3,400-plus gram panchayats of total 3,600-plus gram panchayats in 10 districts during quarter 2 FY '21. The company has successfully completed around 40,250 kilometers of T&D of the total 17,000 kilometers. Let us now move to our financial performance. On our consolidated business, excluding EPC contract, during quarter 2 FY '21, GTPL's consolidated revenue grew by 11% Y-o-Y to INR 5,064 million. The CATV subscription revenue grew by 3% Y-o-Y to INR 2,677 million. The broadband revenue for the quarter grew by 68% Y-o-Y to INR 670 million, led by a rise in subscribers. EBITDA for the quarter surged by 16% Y-o-Y to INR 1,334 million, with a margin of 26.3%. On our consolidated business, including EPC contract, during quarter 2 FY '21, GTPL's consolidated revenue stood at INR 5,847 million. EBITDA for the quarter increased by 10% Y-o-Y to INR 1,390 million with a margin of 23.8%. PAT for the quarter surged by 59% Y-o-Y to INR 453 million. Our EPC contract during quarter 2 FY '21 reported the revenue, EBITDA and profit before tax of INR 73 million, INR 56 million and INR 54 million, respectively. On our stand-alone business, excluding EPC contract, during quarter 2 FY '21, the company reported revenue of INR 3,304 million, which grew by 9% Y-o-Y. This was mainly contributed by 5% Y-o-Y in subscription revenue at INR 1,825 million. The company reported EBITDA of INR 797 million with an EBITDA margin of 24.1%. On our stand-alone business, including EPC contract, during quarter 2 FY '21, the company reported revenue of INR 4,087 million. EBITDA stood at INR 853 million with an EBITDA margin of 20.9%. PAT for the quarter increased by 41% Y-o-Y at INR 348 million. Finally, before we open the floor for Q&A, I would like to tell you that the provisions against the receivables that the company has been making for the past 2 years, we will not have to do that during FY '21. This is all from my side. Thank you, everyone, for your attendance. We can now begin with the question-and-answer session.

The first question is from the line of [ Swechha Jain from ANS Wealth ].

Sir, I have a couple of questions. The first one is like in your last statement, you said we won't be requiring to make any further provisions on receivables. So sir, I just want to know, are you going to reverse this provision? And if you can just confirm the amount, sir?

Thanks, Swechha. On the receivables, still, we have not reversed anything on the books. We have collected some of the amounts which we are accepting. And whatever receivables -- reverse we have to do, we will do in quarter 3 and quarter 4. Yes, we have collected some of the amounts which is there, lying there in the books right now, but we have not reversed the provisions.

Okay. Okay. Sir. And would you be able to throw some light on the amount, sir, is it possible, like, to what extent?

The amount -- this is part of the financials only. It's around -- if you see the -- in the subscription side, our receivables has gone below by around INR 20 crores. So those are money which are coming from those. But we have not taken anything on the provisions side right now. We will take them in quarter 3, quarter 4.

In quarter 3, quarter 4. Okay. Okay. My other question is, sir, with respect to the hybrid box, can you just let us know what exactly we are thinking in terms of strategy? How do we plan to roll it out? What would be the pricing difference? And what entails for a customer also moving to hybrid box?

Hybrid box is under production. We have all the testings and all those things are over -- already over. We are seeing that -- somewhere we'll see that last in quarter 3. Pricing strategy and all the strategy is under making right now. I don't want to disclose it now. We can do it in one-to-one, Swechha, if required because that's the strategy of the company on which we are going to do the pricing. But yes, we are looking forward that will do at a pricing -- competitive pricing and -- so that we can take the demand from the consumers.

Okay. Sir, in terms of rolling out, I believe, will we roll out this in a phased manner? And with -- any particular territories that we are planning to start with?

Yes, it is going to be in the phased manner. Certainly, we are looking forward that, first, we were going to go in the Phase 1 and Phase 2 markets, some selected Phase 1 and Phase 2 markets and then we will start doing it for other markets.

Okay. Okay. Okay. Fine, sir. Sir, my next question, with respect to placement and carriage fee, sir, how do you see this moving ahead for next 3, 4 quarters.

So placement and carriage, if you see, there is a growth and which is related to pay channel with that. So we are going to maintain that the growth rate of pay channel and all we have produced on -- through the placement and carriage revenues. So it is -- the intent is that we are going to be on the same way we are doing it in the last 1.5 years.

Okay. So sir, it will remain at the same -- the trend will remain same in both of these?

Trend will be maintained for both.

Sir, last question, then I will rejoin the queue. Sir, if you look at the balance sheet numbers, trade receivables have increased actually as on 30th September. Sir, can you just explain, this is an account of what? I mean are these receivables related to EPC contract or they are related to our broadband or Internet, sir?

So trade receivables, this is mainly because of the pay channels, marketing placement, which is from the channel side. If you see the trend from last 4 years, it happens that the thing gets surged for the payable side also and from the receivables side also in September for the first 6 months and then it starts getting reduced. And again, it will be at the normal level by March. So that is the trend from last 4 years. We are seeing that trend a bit. But on the receivables side, it is increasing because of the placements and commission income. And on the payable side, it is because of the pay channels.

Okay. Okay. So this is not related to EPC, basically. This is related to pay channels?

No, no. Not to pay channels.

[Operator Instructions] The next question is from the line of Dixit Doshi from Whitestone Financial.

Sir, can you give us the cable TV ARPU?

Cable TV ARPU stands at around INR 123 right now.

Between DPO to LCO.

DPO to LCOs.

Okay. So sir, I understand that after the NTO, we kept our share very low compared to the other industry peers. And earlier, we were thinking of increasing our share with LCO after maybe a year or so of NTO implementation. So any plans of increasing our shares in the near future?

You're right that we wanted to increase the price, but first 6 months due to COVID we have not increased. We wanted it -- the business as usual without disturbing anything. And the second thing is, we are waiting for the NTO-2 to get implemented. And that will give us the opportunity to increase the price and restructure the whole packages and all. So that's an opportunity we think for, right now.

So can we expect by end of year, the NTO-2 will be implemented and next year, we should see benefits from?

We are also waiting for NTO-2, which is, as you know, that legal cases are going on, on that. Whenever that will happen, we are eagerly waiting to implement it.

Okay. Okay. Secondly, sir, if we see our share of active subscriber to home pass in the broadband business, it is very low. But of lately, from last couple of quarters, we are seeing a good traction. So how do you see it going forward? Can this be a very high growth trajectory over the next couple of years? What kind of, I mean, subscriber base you expect over the next 2, 3 years?

Yes. So if you see quarter 1, we have not done any expansion in the home pass side. So whatever numbers we are getting in quarter 1. And then quarter 2, we did around 2 lakhs. Whatever number is coming is coming from the existing home passes in that 1,30,000 which has come in the last 6 months. See in the FTTH, if you are getting -- connecting into the FTTH and FTTX, it's more of like you have to create the supply first and then you have to do the demand. So here, it takes around 18 to 24 months to convert it up to a level of 18% or 20%. But as we are investing from last 2, 2.5 years on converting our thing, the -- we are reaping the benefits on those that we are investing and converting into FTTX and benefits are coming right now that way. We are looking forward that with the -- if you remember that when we have given the target in the first call, we have said that we will do around 110,000 to 120,000 the whole year, that we have already covered in 6 months' time. This year, we are looking forward that we will be up more than 225 plus, somewhere between 225,000 to 250,000 subscriber, which is going to be the addition. And we are looking forward that in 3 years' time, we are going to be close to 1 million subscriber base in the direct broadband subscribers.

Okay. Okay. That's helpful. And lastly, sir, can you just give us a breakup of receivables in terms of EPC and our cable TV business?

On a consolidated financial basis, my carriage and placement marketing receivables, these are actually sitting at INR 151 crores against the March of INR 86 crores, whereas the broadband receivables are at INR 28 crores against the March '20 of INR 26 crores. Subscription is standing somewhere around INR 158 crores against March of INR 180 crores. Then, GFGNL, which is our EPC contract, that is standing at INR 120 crores against March of INR 146 crores. So these are the broad numbers on receivables.

The next question is from the line of Pratiksha Daftari from Aequitas.

Sir, if you could comment about the employee cost in this quarter, it's gone down substantially. So is there a reason why the employee cost was particularly low this quarter?

The employee cost has gone down, and you will see that other operating, admin and selling expense has gone up. That is because of the shift of the expenses from employee cost to there. We are doing the GFNL projects -- GFGNL projects and we are seeing that if you go based on the SLA base for the third-party, the productivity is more for the maintenance, upgradation, installation and all. So that's what we have committed for main company also as we have taken a third-party and they are working at on the -- based on the SLAs. And based on that, we will see that the productive will increase. We did that in broadband around 2 quarters back, and we have seen that around 15% percent of benefits, which we have already received in the broadband side. Right now, we did it for the cable also, and we will see these benefits in next 2 quarters. So it's more of shifting the cost from employee to the other operating and admin and selling, where you are getting the third-party, mainly for technical manpower, which is for upgradation, installation and maintenance of the lines.

Okay. Okay. And sir, we are understanding that Airtel is planning to tie up with the local cable operators and launch -- get into this broadband market. And they're also looking at some acquisition opportunities. Do you want to comment on that, sir?

[Foreign Language]

Okay. Okay, sir. And sir, I think our EPC contract was supposed to get over by first half of FY '20. So now what are the revised time lines? And when do we expect to finish this contract? And what is the execution we'll foresee in H2?

[Foreign Language]

Okay. And sir, you mentioned in your opening remarks that momentum for cable TV users should pick up for states like Maharashtra, Tripura and some other states also. If you could just elaborate on that, that what kind of user additions can we see in cable TV? And if we are looking at any inorganic growth opportunities, any acquisitions?

This quarter, we have added 100,000 subscribers. As mentioned, we have mentioned there in presentations and all PDF. Right now, every market has got opened. Once the opening is happening after the COVID, the activity on the ground has increased. So now in quarter 3, quarter 4, we will see the surge based on that. First 6 months, it was, you can say, the business is -- was happening not freely on the ground due to the lockdown. Now it is totally open. So we are seeing that already the demands and everything has increased in those markets as people are now ready to install, go to their houses and do it. The demand is increasing. So on that way, we are going ahead. Inorganic, the discussion is there for inorganic and all. For first 6 months, we have not taken any decisions as COVID was there. But we will see if good opportunity will -- is coming. We will see that if we can close something, we will close in next 6 months or after that, depends on how the closure happens. But demand is there for the inorganic also, organic also.

Okay. And sir on broadband side, sir, we've been in the ARPU of about INR 420 for a while now. And this quarter, we've seen INR 430 ARPU increasing. So do we expect this ARPU to be sustainable or the growth rate to be sustainable in ARPU?

[Foreign Language]

[Foreign Language]

We are keeping the range between INR 420 to INR 430. That's the range. We will -- on ARPU, we are not saying that we are going to increase ARPU and all. Whatever our schemes -- whatever our products is going on, we are going to continue on that business. Some product mix will change here and there, but ARPU will remain on that range.

Okay. And sir if I could...

Ms. Daftari...

Last question. One last question. If you could, sir, give the CapEx plan for the year.

So if you remember last time, we have said that the CapEx for this year will be INR 210 crores to INR 220 crores somewhere. We -- till date on that, we did around INR 130 crores of CapEx has already gone for the first H1. The STB CapEx is at around INR 50 crores. Broadband CapEx is at around INR 58 crore. We invested in IT and infra, which is at around INR 16 crores versus around INR 6 crores. As the demand is more in the broadband side, we are going to increase our CapEx. We are going to spend more around INR 120 crores to INR 130 crores in the next H2. So our CapEx for the total year will be somewhere INR 250 crores to INR 270 crores from INR 210 crores to INR 220 crores.

The next question is from the line of [ Akash from Narnolia Financial Advisors ].

Sir, my question is regarding the INR 930 crores you people have provided for the licensing fee from the DoT. Sir, I wanted to know about the status of it? And what is the worst-case scenario that we are going to see in it? Because -- is it related to AGR case? And if it is related to the AGR case, you have a time line to prove it. So what is the status on it? That is my first question, sir.

[Foreign Language]. But as per our legal understanding, it is not applicable to us.

Okay, sir. Okay. Okay. But then, sir, have you made any provisions for it because a lot of companies like Bharti and all, they have also asked the same thing, but they have made provisions for it in case [Foreign Language]

But the others are majorly, they are telecom service providers [indiscernible] directly to telecom service providers. Obviously, they require the provision. Here it's not applicable to us because we are wireline broadband ISP service provider. So it's not -- the order is not saying it's applicable. The order is saying it's a telecom service provider. And we have not made any provision.

Okay. Okay. Okay, sir. And then my second question is regarding Reliance Jio has bought the stake of Hathway in GTPL. So I wanted to know do you people have any arrangement with Reliance Jio regarding the broadband picture because sooner or later they will get into your markets and they will start rolling out Jio Giga Fiber? So I wanted to know about it, sir.

So yes, it's our privilege. Jio is now our partners. And a lot of synergies are coming, especially in content side, especially on infrastructure side, especially on knowledge sharing [Foreign Language]

The next question is from the line of [ Ishaan Poddar from StockEdge ].

Sir, I would just like to inquire about the future plans of the company and the future expansion of what Hathway is looking out for?

Hathway, I cannot comment. If you talk about GTPL, I can say that...

So the GTPL, like what is the future expansion of GTPL?

In terms of cable or in terms of broadband, or both?

Both, sir, both.

[Foreign Language] I'll speak to cable side.

Rajan, sir?

Mr. Rajan Gupta.

Piyush, am I audible?

Yes, yes, sir. Audible, sir.

Perfect. Perfect. So on broadband, I think we had a consistent strategy for the last 2 years. We have been saying pretty similar things. We are expanding home pass in our cable-strong areas, which is, obviously, Gujarat is our strongest area. And idea was to get into 50 MBPS, 100 MBPS FTTH and FTTB and so give a value for money product, okay? And then wait for the right opportunity to monetize. So we have seen now last 2 quarters, there's a huge increase in broadband numbers, okay? Focus now is on further improving customer service because one thing what has happened is with work from home, customer has become increasingly demanding, okay? Customer tolerance level is very, very low. So focus has to be on increasing further service levels on current home passes. GTPL Hathway has also recruited a new head for customer service and overall technical, okay? I'm sure he'll bring a lot of learnings from telcos and try to take service to telco grade. So essentially, focus is on continue what we have done until now, but improve service further to telco grade and that itself will take care of next few quarters kind of growth momentum that we have built up, okay? Parallelly, as Anu Bhai rightly mentioned, wherever we are strong like, for example, the sole project which has been done for government for taking home passes to all the villages and all the rural areas, that gives GTPL opportunity to expand everywhere in Gujarat. The kind of value for money products GTPL Hathway has at INR 400 to INR 600 ARPU, 50 MBPS to 100 MBPS purely unlimited, even in a very small towns, even in a rural area, there's a demand for that. So as soon as the fiber project is getting completed, it gives GTPL potential to launch FTTH, FTTB in every GP area. That itself is sort a huge potential. So I think that's where the focus is going to be.

On the cable business, as you know, we are already in 13 states, launched Tripura right now. And there is a huge opportunity everywhere. If you see that overall 300 million households, out of that around 200 million is TV households and million is satellite and -- cable and satellite households and 100 million is cable households right now. And if you talk about organized player now, they had just 35 million in the -- so 65 million independent cable households are there, which is with the independent operators and all. And as we are progressing, the consolidation of the industry is going to progress as well. So that's there -- a lot of opportunities are there to grow. Plus, there are 60 million DTH households that we are going to target also to win back them. So that's the way if you talk about then around 120 million households currently which is there to target for the whole country on the cable industry. And focusing on targeted way that how we are going for the 65 million for the independent operators and 60 million for the DTH and going to be added. So that is the case. And we're looking forward that we will maintain our growth rates in subscriber base also. And we will reach, in 3 years' time, somewhere between 11 to 12 million.

The next question is from the line of Abhishek G. from Vision Capital.

Hello. Hello, am I audible?

Yes. Please Abhishek, please go ahead.

Yes, sir. So I just wanted to know about, as I can see, our strategy is actually getting into home through a cable TV and then maybe giving the broadband services. And as the Internet penetration is growing high, actually we can see the growth traction coming from that particular way. Is this my understanding, correct? Actually, that's our growth triggers going ahead for next 2, 3 years?

Yes, that is the way forward.

Okay. Okay. And what do you think is the OTT platforms on slot which is happening? Is it going to hamper the cable TV business as such? Or are they will live together even the OTT players as well as the cable? Is it like the cable TV subscription is going down because of these OTT players?

[Foreign Language] So yes, I'm not saying it will -- the linear TV will replace the OTT, but it's a complement each other linear TV with OTT.

Okay. So they are not going to lead into market share, right? That will not hamper our growth that's what I wanted to know.

Yes. We are not seeing any hamper because of the OTT and all. Both are -- whatever in household and OTT is also coming, both are together there. And that's the way we are looking forward that both are going to together are going to be in the households. OTT is going to be more in the phenomena of Phase 1, Phase 2. But Phase 3 and Phase 4 still only TV will be there. Phase 1 and Phase 2, both are going to be in the households.

Okay. Phase 1 and Phase 2, in the sense, you mean Tier 1, Tier 2 cities?

Yes, that's right. That's right.

Okay. Okay. And even I wanted to know about this broadband, are we trying to create niche for these Tier 3, Tier 4 cities or maybe rural areas because that's where we try to specialize -- try to create our customers more rather than the metros and Tier 1 cities? Is my understanding correct?

Yes. Yes, your understanding is correct. It's like, right now, in Gujarat, we are at around 120 cities, which is Phase 3 and Phase 4 cities also there. As Rajan was mentioning that we are completing our GFGNL project, we are connecting 3,700-gram panchayats in every village and all, and that is going to give us the opportunity to increase our business in 250 more cities and the rural areas, that's we are looking forward, where we want to give the services to every nook and corner, whether it is Phase 3, Phase 4 everywhere we want all.

The next question is from the line of Hardik Jain from White Stone Financial.

Congratulations for a very good set of numbers. So I have just 1 question, sir. Now when we see the financials, sir, we have been reducing debt over the last couple of years. And we'll be generating enough cash and we should be debt-free by the year-end. So in that perspective, in that light, what is your thoughts on dividends? Because last year, you increased your dividend by INR 3 per share. So do you wish to increase it further as our financials improve? What are your thoughts on that?

Yes. Actually, yes, we are planning. [Foreign Language]

Your next question is from the line of Naresh Vaswani from Sameeksha Capital.

Hello? Hello, can you hear me?

Yes, sir, please go ahead.

Yes, sir, on the opening remarks, you mentioned that we are one of the very few cable TV companies which have been operating profitably. So I wanted to understand what different have we done from others, if you can highlight that?

I don't want to comment on other companies and all. I will just say that our strength, which we'll talk about, it is more of -- we have the positions in the operating markets. Wherever we are, whether it is in Gujarat, whether we are in Kolkata, whether we are in West Bengal, whether we are in Maharashtra, we believe that being #1, #2 is going to give you more and more -- you can have more benefits out of the market. We believe that the cable industry or cable market give you benefits if you have the dense connectivity. So you go into one area, you create the dense connectivity where you can make more margins as your cost -- operating cost is lower. That's what we are doing from last 13 years. Wherever we are going, we are going with the mindset that we are #1 and #2 in that market, first thing. Second, we are also on the selection of the market, where you have to go, this should be a good consumption market, good paying market and all. So we are very -- whenever we are going into any market, we do all types of analysis. We see that, that's going to be a good consumption market, good paying market and then we enter into that market. That's why we are just at 13 states in last 13 years, much all over India. I will say that the look our partners -- as our business partners and operators and our view towards operator is always friendly and we consider them as a business partner and work on that way. That's in the philosophy of the company as it's a company from bottom to up approach this company has been built as Mr. Aniruddhasinh Jadeja has started his career as a cable operator and then built this whole company. So it's a bottom-up approach, which help us in the market and hope I will say that somewhere, technology side and all, we want to go every time for the high technology. We have Harmonics as our main vendor for the whole NOC, which is there. We've talked about our broadband. It's Nokia CMG and all is there. We are putting all the equipments of internationally recognized from the companies we are doing. So the third is the -- fourth is the technology part, where we are -- that whatever we are going to do in the technology and infrastructure side, it should be state-of-art and it should be from the very renowned and good companies and all. So I think this -- I will say that this 4 things is there, which is the strength of the organization. And we are going to continue on these strengths and advantage.

Yes. That was very elaborate answer. And second question was, sir, when we are entering these new states for the cable TV, whose market share are we currently capturing, can you tell that?

As we say that there are 65 million homes are on the independent operators. And as the market is consolidation, the opportunity is there for the consolidation and taking that. Plus, somewhere we are running the campaign for taking the DTH market share like in Gujarat, we are taking it from there also.

Mr. Vaswani, you have any more questions?

Yes. Just last question. Sir, are you -- you mentioned you are looking at some inorganic -- are you -- can you elaborate something on that, on the inorganic growth opportunities?

That's -- those deals are under discussion. I will just can give that demands are very high on the inorganic side also. The company will close those deals at the appropriate time and as the things so -- it will come in the public as the deals will happen now.

Okay. Okay. And that would -- in case anything fructifies, that would be through internal approvals or a mix of debt and equity? How will we plan that?

No, it's through the internal only. We are not raising any debts in the company. It has to be happened through the internal approvals only.

[Operator Instructions] The next question is from the line of [ Swechha Jain from ANS Wealth ].

Sir, just a couple of more questions. Sir, in terms of the expansion plan, what new territories we plan to enter this year? And also, I wanted to understand a little bit from the broadband industry perspective, like we have 2,800 LCOs that we have partnered with. Now in terms of broadband strategy as we go ahead, how important the LCO will be in terms of expanding our reach, especially with the hybrid box that we are planning to come up? And do we also see some more tie-ups with the LCO, like from an overall industry perspective and also with respect to GTPL, if you can just explain that will be very helpful, sir.

So Swechha first on the expansion side, as you know, that we have started 2 new states in last 7, 8 months. One is Tamil Nadu and the other is Tripura. We are going a bit slow on entering into new states because of the COVID. But as the things will becoming normal, we'll see that as we have to enter into other new states, we'll do that. But as these 2 states we have entered, we have to put our foot in this. Already in Tamil Nadu, we have started doing very aggressive, but we have to step back because of the COVID. We have already started the planned procedures. So we are looking forward that this [indiscernible] at least make our strength in this phase first and then going to -- delve into another. But yes, if some very good opportunity comes, we'll do that. We'll go into the other states. So that is the strategy on which we are working. Apart from that, if you talk about the relationship with the LCOs and all, we have very good relationship with the LCOs. Somewhere our LCOs are awaiting for the hybrid box. They all are demanding that when we are supplying hybrid box that they can put. They have already taking the market -- their subscription base also, and they're seeing that there is a demand in the market. So that way, you will see the tie up with all those are there, already the relations are there with many operators. And the demand is more from their side rather than our side, like give us the hybrid box, we want to see it. As earlier, we told them that we are going to come in April with a hybrid box but because of COVID, it got delayed. So already we have seen that demand from our partners.

Sir, just a follow-up on this. With respect to like Jio and other OTT platforms, do you see LCO model phasing out in the entire broadband industry going forward? Or you think they will still be a very key link?

The LCO model will remain same or rather than it's a link. [Foreign Language]. Rajan [Foreign Language].

So LCOs obviously have played a very critical role in ensuring the last mile infrastructure, in ensuring whatever relationship they have with the customers. Using that relationship, we increase our broadband penetration. And GTPL, specifically, because of their very high market share in geographies they operate, enjoy excellent trade relationships. And over the years, they have helped increase LCO revenues. So they're also very loyal to them. So as I mentioned earlier, in Gujarat with so many GPs now, fiber being available, okay? So broadband penetration will increase big time through GTPL. And LCOs in those particular taluks or those particular GPs will remain a key enabler and a key partner. That's all from the GTPL perspective.

Okay. Okay. Okay. That makes sense. So just 1, 2 more questions. So with respect to EPC project, now once we are done with Phase 1 of 3,700-odd gram panchayats, is there a plan for GTPL to partner for Phase 2 if there is an opportunity?

Sure, yes, if any opportunity will come, we'll work out or receive how [Foreign Language] But still GFGNL, there's 3 plus 4 years, 7 years contract, O&M part, it's the GTPL, same GFGNL.

Okay. Okay. Okay. And sir, you mentioned earlier, you have an understanding with Jio that instead of competing, you're going to complement each other. But is there any kind of formal arrangement? Or is it just like a soft understanding where we know that we are going to benefit from the synergies and going to work to complement each other? Is there a formal agreement or understanding, sir?

See, it's a ground level understanding and it's completely -- because whether it is a bandwidth side, whether it is the content side, whether it is the infrastructure side, whether it is knowledge sharing side. So it's a ground level understanding is there.

Okay. Okay. And sir, just last question. I just want sir, can you just confirm the receivable number? I think I missed out the number.

Swechha, if you can connect me one-to-one, I will give you.

Sure, sir. I will do.

Actually, for the benefit of others, as we have given earlier, it's better that we will give you one by one.

The next question is from the line of [ Krishan Somani from ICICI Bank ].

So just a couple of questions. First is from the cable side. Sir, the first thing I just want to understand, like you mentioned that whenever you go to the new market, whenever GTPL Hathway goes into a new market, they tap the share of independent operators. So I just want to understand the position of independent operators, whether they convert as LCO for GTPL or they are completely out of the business?

[Foreign Language]. Whether they will convert as LCO also, they convert as a JV partner also, and some places, they'll -- they completely exit also.

Okay. Okay. Okay. And another question is on activation income, which is another key component for cable business. So I just wanted to understand this activation income, is it synchronized with the cash realization? Or is it majorly deferment of earlier income, which has been received by GTPL?

Mainly, the activation income is the set-top boxes which we are seeding in the market, we are actually receiving revenues. So this is the income which we are showing in our revenue side.

So right now, it is around INR 450 this year and rest is getting deferred for 5 years. Earlier, for NTO, it was like deferment for 5 years for the whole amount. Now INR 450 is coming in the same year and the rest above that is getting deferred for 5 years.

INR 450 in upfront. And the total cost is approximately INR 1,000?

INR 600 to INR 700.

INR 700. Okay. Okay. Okay. And the third one is like you mentioned about the hybrid box. So there you will be partnering with OTT players also. So does it going to generate any additional revenue stream in terms of you'll be facilitating OTTs for a new market, or you will give your subscriber for OTT subscription? So that is going to generate any additional revenue stream for GTPL?

Because as you have seen that the pricing mechanism and the whole thing is -- still we are making it for the hybrid. Please wait till 1 month's time more. At that time, when we speak to you all, we'll comment.

Sure. Sir, in terms of broadband, I just want to understand in terms of when we look at the CapEx for home pass, and I understand that when we compare GTPL Hathway with Hathway, so Hathway is -- majorly, Hathway had penetration into metro cities where the densities are higher. So ideally, the CapEx should be lower for Hathway when we talk about CapEx for home pass. But it is other way around, like CapEx for GTPL Hathway is lower as compared to Hathway. So any specific reason for this, if you can elaborate?

See we can't comment on Hathway's CapEx and all. We can -- I can give you GTPL's perspective. GTPL is, as a strategy, we are going to expand in the broadband only where we are having the presence in the cable. So our strategy [indiscernible] on the same infrastructure of the cable, and that is going to give us the benefit in the CapEx side. So that's why our CapEx is at this rate. As we have the -- that's the strategy on which we are going. Wherever we have the cable infrastructure, we are going right on that on the broadband. So that is the reason that our CapEx is at this range.

Okay. So basically, the head-end, cable, everything is same for cable and broadband?

Yes. That's what we are working on so that we get more ROI on those.

Okay. And in terms of CapEx, if I talk about how much CapEx belongs to infrastructure and how much CapEx belongs to consumer premise equipment, I mean, in terms of a unit or per subscriber basis?

You can say 60-40. 40% belongs to consumer side and 60%, right now, it is on, you can say, core side.

Okay. Okay. And sir, so basically, whenever you enter into a new market in broadband, do you share any revenue with LCO, I mean as in onetime commission or some recurring revenue for broadband income?

We are not sharing revenue right now. Some places, we have -- some of LCOs, we have understanding with them, 5% to 10% of commission structure.

Okay. But is it recurring or onetime commission to add subscribers or...

It depends. On the sales part, it's a one-time. Some places like if your retention part, it's recurring.

Okay. Okay. And what is the churn in terms of fiber network and the legacy network?

So churn ratio in terms of -- you want to know about cable TV or broadband?

For broadband.

Lane -- if you see the lane churn ratio, if you see this is as average, 20% per annum. And FTTH part, if you see right now, average is coming around -- it's not more than, you can say, 7% to 8%.

Per annum?

Yes, per annum, right.

The next question is from the line of Rohit Dokania from IDFC Securities Limited.

Just 2 quick ones. One is if you can talk about consumer behavior a bit. Do you think as the economy opens up and as the -- hopefully, the disease sort of ends, is there a likelihood that the churn rates in broadband can increase? And subscribers who had come because of work from, et cetera, they can sort of cut their connections when the 3 months, 6 months plans are over? Or do you think this consumer behavior will stay and these people will stay on longer?

Rajan, sir, would you like to take this?

So Rohit, it's a complex question you asked, okay? Obviously, it's very -- sometimes it's crystal gazing in terms of answering this. But let me tell you one thing. The kind of value for money product GTPL has, okay, because finally, what are you paying? You're paying INR 425 plus taxes, okay? And in return, you're getting 50 MBPS unlimited, okay? And the way even mobility data tariffs are gradually increasing, okay? So it's a really, really attractive value for money proposition, okay? And some of the habits which have been built up in work from home or overall COVID period, okay, are likely to be more permanent. For example, we are seeing more and more corporations saying permanently people can work from home. We are seeing people are discovering that online classes are as good as off-line classes. In fact, sometime better, okay? When I talked to my friend, my son's friend, they say online is better than off-line, okay? It gives a convenience to everybody. So a lot of habit changes that are happening, hopefully, they last permanent, and demand should, in fact, keep on increasing. That's our current estimate. And even if some reversal happen, GTPL with their very low ARPU and very, very attractive value for money proposition and with increasing service standards, okay, I think we should have this momentum continuing for quite some time.

Great, Rajan sir. Just 1 question, either Piyush or Anu Bhai. If you can talk about what kind of sort of impact the current NTO 2.0 can have across stakeholders in the industry, assuming that it is implemented in the current form? Do you think ARPUs will increase again for consumers because of 2.0?

[Foreign Language]

Okay. Okay. Fair point, sir. That's the fair point. Sure, great. I think this is very helpful. Stephen, do we have more questions in the queue?

No questions as of now.

So I think we can then end the call. Anu Bhai or Mr. Piyush or Mr. Rajan, would you want to make any closing comments?

Yes. Rajan, sir?

No, Piyush, nothing from my side.

So thanks a lot, everyone, for joining for the quarter 2 earning call. We look forward to meet you, to talk to you on the next quarter results, and please stay safe and healthy. All the best. Thank you.

Thank you.

Thank you.

Thank you. Ladies and gentlemen, on behalf of IDFC Securities Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.