Four multi-system operators (MSOs) ? Den Networks, Hathway Cable & Datacom, Hinduja-owned InCable and Zee Group-promoted Wire & Wireless India (WWIL) ? have put in independent bids to merge with rival DigiCable Network India, signalling a consolidation in the cable TV industry in the wake of mandatory digitisation, a person with direct knowledge of the development said.
The owners of DigiCable, Jagjit Singh Kohli, Yogesh Shah and private equity investor Ashmore Investment Management, have appointed investment banker IDFC Capital to seek bids for a merger.
?We don?t want to comment on market speculation,? said Jagjit Singh Kohli, DigiCable managing director and chief executive officer.
MSOs downlink signals of television channels and transmit them to local cable operators (LCOs) who, in turn, connect them to consumers.
The government has asked cable operators to digitise their signals in all four metros by July 1, 2012, and all over India by December 31, 2013. Digitisation helps check piracy by LCOs, increase subscription revenues for broadcasters, allows subscribers to choose from a wide array of channels and provides quality digital feeds of channels.
?I?m not aware of any such bids,? a WWIL official told FE. Sameer Manchanda, chairman and managing director of Den Networks, did not respond to FE?s calls and text messages.
PE firm Ashmore Investment owns 49% stake in Broadband Pacenet India, which controls 51% of DigiCable, and 49% stake in DigiCable ending up its ownership to 74%. The rest is held by real estate developer Stellar Holdings, owned by promoters.
?The idea is to merge DigiCable with one of the four to create a larger entity and a deal could be signed in a couple of weeks,? the same person said. DigiCable along with Broadband Pacenet is valued anywhere between R550 crore and R600 crore.
?Many broadcasters are forming alliances and cartels of their own to command better rates,? a senior InCable executive had told FE in an earlier interaction. ?Even MSOs and LCOs are planning to come together.?
?Consolidation in the cable TV industry is happening in the wake of the mandatory digitisation and if DigiCable merges with another MSOs, it will create a very strong distribution company with a large subscriber base,? a media analyst with a domestic brokerage said.
In 2010, Reliance Communications (RCom), owned by Anil Ambani, agreed to merge DigiCable with itself in an all-stock deal to create a larger company Reliance DigiCom, which would provide direct-to-home (DTH), internet protocol TV (IPTV) and broadband services.
The deal, however, had to be called off in July 2011 as the information and broadcasting ministry restricted cross-holdings in cable and DTH companies to 20%.
?The digital TV and broadband space is poised for an explosive growth. With this game-changing move, we hope to lead the next revolution in digital home entertainment in India, by offering a world class TV experience and ultra high-speed broadband capability to a billion people,? RCom chairman and managing director Anil Ambani had said after the deal was made public.
Established in 2007, DigiCable has about 8.7 million subscribers and offers digital feeds of 500 TV channels on its platform. It has a strong presence in Punjab, Uttar Pradesh, Madhya Pradesh, Rajasthan and Chhattisgarh.
Media consultants say more consolidation is in the pipeline. ?We will see more consolidation in television distribution as digitisation sets in,? said Jehil Thakkar, head (media and entertainment) at KPMG. ?Such alignments will check piracy of cable signals, reduce carriage costs and increase subscription revenues for broadcasters.?
In May 2011, Zee Entertainment Enterprises and Star India merged their distribution arms ? Zee Turner and Star Den ? to form Mediapro Enterprises, which now distributes 75 channels. Uday Shankar, CEO of Star India had said, ?The idea is to be collaborative, bring as many people together from all segments of the industry, rather than trample over one section to go on to the other section.?
Earlier this year, TV18 and Viacom 18 formed a distribution joint venture ? IndiaCast ? to distribute all channels of TV18, Viacom18, A+E Networks, Sun Network, Disney and Eenadu Group.
