Chennai : The recent recommendation from TRAI on the new DTH license renewal policy, which has addressed the plight of the DTH operators and subsequently recommended DoT for many favourable policy changes in support of the operators, has given a new hope to the Indian DTH industry which was reeling under accumulated loses of around Rs 11,400 Cr with none of them witnessing a break even scenario, is heading for a consolidation through major merger and acquisitions that could spell a trend of growth story for the Operators. The upcoming deal between Sun Direct DTH and Reliance Big TV could be igniting a spark for many such future deals in this direction.
Reliance Digital TV, the fully-owned subsidiary of Reliance Communications that runs its direct-to-home (DTH) operations, will merge with Sun Direct to become India’s second largest DTH company.
Under the deal, to be announced in a few days, Reliance Communications (RCom) will have 26% stake in the merged entity. The merged company would also take over about Rs 1,500 crore of debt from Reliance’s DTH operations.
As part of the deal, Sun Direct will later go for an IPO. Reliance would then exit the merged company. According to sources close to the deal, RCom has valued the 26 per cent stake at around Rs 1,500 crore.
The deal would help the Anil Ambani-led Reliance Group reduce RCom’s debt by Rs 3,000 crore. After the deal, management control would shift to the Marans, who own Sun Group.
Reliance DTH has a gross subscriber base of 4.1 million. It runs 260 channels on high-density format. Sun Direct has a subscriber base of about 8.5 million.
Dish TV is the largest company in this segment, with a gross subscriber base of 15 million. Other major players include Tata Sky (about 11.5 million subscribers), Airtel and Videocon D2H. The country’s total DTH subscriber base rose from 28.7 million in December 2011 to 32.4 million in December 2012, according to analyst reports.
The deal is essential for Sun Direct, which has strong presence in the south, but not in the north and west, where Reliance has a large subscriber base. It also marks the beginning of consolidation in the DTH business, now facing tough competition from digital cable TV operators, especially after the government mandated subscribers and multiple system operators to shift from analogue to digital technology.
The deal would help RCom restructure, get out of its non-core businesses and use the proceeds to reduce debt. The company is expected to sell majority stake in Reliance Globalcomm, which controls its submarine cable assets worth Rs 6,000-7,000 crore.
Sun Direct DTH with 80:20 joint venture between the Maran family and Malaysia’s Astro Group, specialises in catering to regional tastes, through MPEG-4 technology. After its launch in Tamil Nadu in December 2007, it expanded to other southern states, hitting the one-million-subscriber mark in less than 200 days. In September 2008, it rolled out pan-Indian operations.