The shareholders of cable and broadband service provider DEN Networks have approved a proposal to demerge the company’s broadband business into a fully-owned subsidiary unit called Skynet Cable Network. Currently, DEN operates broadband under Internet services under its DEN BOOMBAND brand in Delhi and NCR regions and had reported 159,000 subscribers as of December 2016.

The demerger also comes after DEN’s broadband business broke even at an EBITDA level during the quarter ended 31st December 2016 (Q3 FY17). The company also has plans to expand its broadband footprint to 15-20 new towns in the next 6-9 months. Between Q1 to Q3 FY17, the company reported total broadband revenues of Rs 60 crores, at an operational expenditure of Rs 70 crore.

Why DEN is demerging its broadband unit

A demerger will help DEN focus more on its broadband business and run it as a standalone service, independent from its original branding which earlier represented DEN as cable and broadband provider. The development is also in line with the company’s expansion plans into new cities, especially at a time when the Indian telecom industry is getting intensely competitive.

Secondly, the Indian government itself is subsidising massive amounts of infrastructure to help proliferate broadband connectivity. The government said that it would allocate Rs 10,000 crore from the 2017-18 budget for deploying high-speeds optic fiber at villages/gram panchayats using BharatNet. This affects the telecom sector plans and outlook of the broadband industry, especially at a time when telecom regulator itself is examining methods to expand “cheaper” connectivity via WiFi and broadband.

Thirdly, bigger telecom companies like Vodafone, Airtel, Idea, Jio have also started focusing on broadband and fiber. A demerger will help DEN place itself better for the upcoming competition. This because a demerger allows the company to appoint a standalone management looking into broadband operations.

DEN Networks financials and user metrics

For the quarter ended December 31st, 2016 (Q3 FY17), DEN Networks:
–Added 20,000 broadband subscribers, which is a slower growth when compared to previous quarter, when it added 25,000 subscribers.
–Overall subscription base of 159,000, up from around 140,000 last quarter
–ARPU of Rs Rs 752, down from Rs 775 in the Q2, and Rs 780 in Q1
– Average GB consumption per household: 59 GB, up from 51 GB in Q2, and 45 GB in Q1.