Mumbai: Dhoots, promoters of world’s largest picture tube maker Videocon group with interests in energy, have decided to sell a minority stake in Bharat Broadcasting Corporation which provides Direct to Home (DTH) television service under the Videocon D2H brand, two people familiar with the development said. Videocon owns 100% stake in the DTH business now.
“We are deliberating a stake sale,” a person with direct knowledge of the negotiations said. The company is talking to private equity (PE) funds to sell stake, a second person familiar with the development said. One of the PEs Dhoots have begun negotiations with is Apollo Global Management, the sixth-largest private equity fund by assets under management. The PE fund had invested $100 million in Videocon’s rival Dish TV in 2009.
Videocon launched the DTH business as part of its synergy with the television-making business which the group transformed into a component supplier as it faced threats from multinational consumer goods giants like Samsung and LG. Though it was late in its 2009 DTH entry, the company is now one of the leaders in this six-horse race, driven by its consumer sales points through its TV sales counters and its consumer goods retail chain “next”.
India’s DTH market is divided between by Dish TV owned by ZEE Group, Tata Sky, a joint venture between the Tata Group and Rupert Mudoch’s Sky, Airtel Digital owned by India’s largest mobile telephony company Airtel, BIG TV of Reliance-Anil Dhirubhai Ambani Group, Sun Direct owned by Southern media group Sun TV and Videocon D2H.
The DTH market is driven by the growing middle class and its rising disposable income, increasing television penetration and sale of LCD televisions, price wars and diverse package options and advantage over traditional cable operators.
The number of DTH subscribers will reach 45 million in 2014 from 17 million in 2009 and 58 million by 2020 overtaking the US, a study by Media Partners Asia (MPA) said. “Most DTH satellite pay TV operators will start making money after 2013,” it said.
But, there are many challenges too. Transponder capacity, high churn, subscriber acquisition costs and limited pricing power remain challenges, but can overcome by scale and cost control.
Some companies say the biggest challenge is the presence of DD Direct, owned by the Government. “If somebody is charging half my price, I can create a low-cost package with lesser content. But if somebody is selling for free, I can’t compete against that,” Tata Sky chief executive Harit Nagpal said in an earlier interaction with FE. “If entertainment and news is such staple diet that the government is forced to provide it free of cost, then why is entertainment tax levied when DTH platforms provide it?” he wondered.
Source: The Financial Express