Southern Network Limited (SNL), a cable TV operator, is all set to raise Rs 150 million through an IPO to finance the expansion cost of digital-based Multi Point Multi Channel Distribution System (MMDS) technology.
The SNL issue will be up for public subscription on May 12-13, 2004 at a par value of Rs 10 per share.
The company's local & foreign sponsor, directors and an associated undertaking Southern Travels (Pvt) Ltd hold a cumulative stakes of 53 percent, which also includes controlling stakes acquired from Shaheen Foundation.
The amount of private placement also constitutes 17 percent, which represents contribution from Bank Alfalah and a local brokerage house. These pre-IPO private placements are not saleable before six months from the last date of subscription.
The whole issue of Rs 150 million offered to the general public represents 30 percent of the total paid up capital of Rs 500 million, which also includes a portion for the employees of the company.
SNL is coming up with a cost effective and digital MMDS technology, which is a step ahead from the previous Shaheen Pay TV's old analog-based MMDS technology.
Currently, SNL is maintaining an 'exclusive' MMDS cable TV operating licence. The Frequency Allocation Board (FAB) has assigned licensed frequency, which restricts SNL to air only 20 channels in Karachi and 12 channels in Lahore and the twin cities of Islamabad & Rawalpindi.
However, they are negotiating further allocation of band range to increase channels up to 50.
SUPERIOR TECHNOLOGY: "We are of the opinion that once the networking is installed and Head End would be in place from the main broadcasting area and the subscriber base of Shaheen Pay TV would partly be recouped, then the company can generate enormous revenue stream from customised services based on the MMDS technology, which is a far superior technology from unorganised cable TV operations," said Faisal Shahji, research analyst from Capital One Equities.
Currently, the company is targeting 100,000 subscribers in a month's time.
"We feel an upside potential for a player, like SNL, in a MMDS cable TV industry once the issues pertaining to the quality of services, subscriber base and government regulations regarding the unorganised operatives are resolved. Despite the advent of new global technologies, such as wireless based '802.16', we foresee a demand for MMDS-led technology enabled solutions in Pakistan," Faisal said.
Despite the gross losses sustained by the company due to the inconsistencies in the old technology and inability of the Shaheen Pay TV to make recoveries from the subscribers, "we expect that once the new operation would materialises and the density of the customers would increase, SNL would be able to set off the previous losses from the books," he said. "We believe that due to the revenue generating capacity of the cable operations, the company would report profits in the FY05.
"According to our working, the company needs at least 215,000 subscribers in order to attain break even level".
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