FDI in broadcast carriage services now under automatic route
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The government on Monday did away with the need for prior approval of foreign direct investment (FDI) in the broadcasting sector, allowing 100% FDI via automatic route for broadcasting carriage services.
This means that direct-to-home (DTH) operators, cable network companies, headend-in-the sky (HITS) operators and mobile television operators can now raise 100% FDI without seeking approval from the Foreign Investment Promotion Board (FIPB).
There are seven DTH operators, two HITS operators, 700 multi-system operators (MSOs) and 60,000 cable operators in the country, according to the Telecom Regulatory Authority of India (Trai).
HITS is a satellite based system to deliver TV channels to cable operators.
The government had raised the foreign investment limit for DTH, cable networks and HITS to 100% from 74% in November 2015, noting that only 49% FDI was allowed through the automatic route. For 100% FDI, companies were required to seek FIPB approval.
In the new policy, the government also said that fresh foreign investment beyond 49% in a company which is not seeking licence or permission from the sectoral ministry will require FIPB approval if there is a change in the ownership pattern or a transfer of stake from existing investors to new foreign investors.
V. Raj Kumar, group general counsel at Den Networks, a Delhi-based cable TV distribution company, said that raising the investment limit is bound to create more opportunities in the sector. “The investment will flow and that’s better for everyone,” he said.
While cable industry executives welcomed the announcement, DTH firms and HITS operators said that it will provide no additional benefit and is premature. “The HITS industry has not even touched the previous 74% FDI limit, let alone 100% and automatic route,” said a senior official at Hinduja Ventures Ltd, declining to be named and adding that this tweak may be a good sign but the industry has to wait and watch. The Hinduja group operates both a digital cable network and a HITS platform.
Harit Nagpal, managing director and chief executive officer at Tata Sky Ltd, agreed, saying 100% FDI via the automatic route is meaningless and will not lead to an increase FDI inflows. He emphasized that the government’s 20% cap on cross-media holding is blocking the inflow of foreign funds.
“Two years ago, Trai had recommended removal of this cap which has not been approved,” he said.
Nagpal added that financial investors are available but they don’t bring value to the business and have a short-term horizon. “We want strategic investors who are already in the media business to bring value. Unless those people are involved, no matter what FDI is allowed, it will not help bring in the requisite investments,” Nagpal said.
Zee group’s DTH firm Dish TV India Ltd said that the government’s statement was not clear and that the company will wait for the detailed report before commenting on the changes.