Mumbai: Television and fridge maker Videocon Industries, with interests in oil and energy, is planning to sell its direct-to-home (DTH) business Videocon d2h to one of its rivals, a person with direct knowledge of the development said, signalling a consolidation among six DTH operators. “The idea is to build scale with solid subscribers, but with a lower stake,” the person said.
Videocon d2h, the last to enter this business in July 2009, competes with Dish TV, the market leader with most subscribers, Tata Sky, a joint venture between Tata Group and Rupert Murdoch’s Sky, Airtel Digital TV, owned by Bharti Airtel and Reliance Digital TV, owned by the Anil Ambani-led group. Sun Direct is the sixth operator, primarily focused in southern India.
Videocon will begin talks with rivals independently after it partners with a foreign operator. “Videocon is in talks with one of the largest DTH operator in the US to form a joint venture,” the same person said. He did not reveal the name of the partner.
Consultants say a merger will have its challenges.
“If any merger happens, two things have to be taken into account — there should be minimal overlap in the customer footprint and synergies in the DTH positioning should be taken care of,” said Jehil Thakkar, head (media and entertainment), KPMG India. “For instance, if Tata Sky, which is considered a premium operator, merges with a middle-to-low-end player like Videocon d2h, the new entity would have a complete spectrum of customers and services.”
Tata Sky and Dish TV denied any talks with Videocon. “These are market speculations and we are not in talks with anybody,” Harit Nagpal, managing director and chief executiver, Tata Sky, said.
Dish TV, too, denied any talks with Videocon or any other DTH player. “Dish TV is not in talks with any operator for any sort of consolidation,” a company official said. Airtel Digital TV did not respond to a mail from FE.
Some DTH operators have been trying to sell a part of their stake. Reliance Digital TV had plans to dilute stake to raise anywhere between R2,000 crore and R2,500 crore.
“Consolidation is bound to happen among cable and satellite companies,” head of an investment bank said.
However, DTH companies disagree. “Consolidation is a very difficult exercise because you have to go to every subscriber and change his dish,” said Nagpal of Tata Sky.
Videocon, though the last entrant in the DTH sector, has been the fastest in adding subscribers. It crossed 4 million subscribers in October 2011 and has added another 1.1 million until June this year. It adds 0.17 million subscriber per month, only trailing behind Airtel’s 0.19 million additions, data released in February 2012 by Singapore-based consulting firm Media Partners Asia (MPA) showed.
The company occupies 11.4% share of the DTH market, ahead of Reliance Digital TV with 9.5%, according to the MPA data. Until 2011, 44.4 million subscribers held DTH connections, of which 30 million are active, the report said.
Foreign DTH operators are also keen to enter India, but the government’s restriction of foreign ownership to 26% in domestic companies is stopping them. DirectTV and Dish Network of US, Bell TV of Canada, BSAT of Japan, Tricolour TV of Russia and Foxtel of Australia have been looking to gain a foothold in the Indian DTH sector, riding on the hope of an increase in the FDI limit, which offers them controlling ownership.
“If the FDI limit goes up, we could see a complete change in the DTH space with both foreign and domestic companies looking to come together,” Thakkar said.
Source: The Financial Express
Filed Under: Videocon D2H