Haresh Chawla | We are committed to winding down debt6 min read . Updated: 30 Nov 2011, 11:38 PM IST
Haresh Chawla | We are committed to winding down debt
Haresh Chawla | We are committed to winding down debt
New Delhi: Haresh Chawla, the outgoing group chief executive officer (CEO) of Raghav Bahl-promoted Network18, which has interests in news broadcasting, Internet and print media, has announced current group chief operating officer B. Sai Kumar as his successor.
In an interview in New Delhi, Chawla spoke about his 12-year stint at the company that was marked by organic and inorganic growth, and a plan to add regional channels to the television business.
Sai Kumar is taking over your role at Network18.
What about your successor as group CEO at Viacom18 (the equal joint venture between Network 18 and Viacom Inc. for the entertainment channels)?
The search for an appropriate candidate is still on
Did anything go wrong between Raghav Bahl and you?
No. One phase of life is over…I thought. I wanted to step out and do something different. The company is headed into a different phase now. It will be more about managing and maintaining really.
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Haresh Chawla, the outgoing group CEO of Network18 talks about his work in the company and his plans for the future.
Where are you headed?
There are several opportunities. First, I will take a break. Then, I guess, I may either get pulled back into the larger media space or help others to build up businesses.
Will you set up some kind of a fund?
I have not decided. I have done media for the last 15-16 years. I set up the music label for the Times Group. I don’t want to say I am a specialist, but I have been a start-up person. Network18 has also been a series of start-ups. It has grown organically and inorganically. We acquired IBN7 (Channel7), Infomedia and even Viacom18, that was a running company.
Any bad acquisition in hindsight?
No. I think the really challenging acquisition was Infomedia in valuation terms and not as a business. If you look at the valuations of both the companies at that point of time, it was a few percentage points of our market cap. Had it been a stock deal, everyone would have applauded it. We were hoping we would be able to fund the deal indirectly via stock, but the timing went against us. The market just collapsed and we paid for the acquisition in cash. So it may have look overvalued.
Has it worked for you?
We managed to get a good valuation and sold the outsourcing business in that company. We are in the process of divesting the press business. We have built out the local search, Yellow Pages and the voice information service businesses. It is really the second largest player in the local search business. No. 1 is Just Dial. We made Yellow Pages online and launched AskMe, a voice information service, in Mumbai. We run the information portal burrp. We are also the largest Indian Internet destination by comScore outside global players like Google and Yahoo. For this, all our assets are counted—Moneycontrol.com, In.com, all our content sites.
Our losses are coming from the Internet and e-commerce (HomeShop18) investments. These spaces are being invested in by every player in the market, so Network18 cannot afford to step off the pedal. Unfortunately, the value we have built will have to probably show as investment losses on our balance sheet.
What else are you investing in?
You will see investment in a few more TV channels. History (channel) was launched two months ago. A second kids’ channel and Comedy Central, Viacom’s international channel, will be launched. Turner already has two children’s channels in India, while Disney has three. Our channel will be unique and local. I am also evaluating entry into the regional channel market and building a large network, as large as Star or Zee.
Are you acquiring Eenadu’s television business?
We are exploring both organic and inorganic options. Several businesses are on the block.
How will the regional entry help?
It will allow the network effect to take place. The subscription revenue for Network18, which is currently only about 12% of our revenue, will go up. It will go up to 30%. Our peers (Star and Zee) have 35% revenue coming from subscription. The launch of new channels is to strengthen our bouquet for the upcoming digitization wave.
But other than CNBC-TV18, nothing makes money for you.
Colors makes money. MTV, Nickelodeon, VH1 make money. They are profitable on an Ebitda (earnings before interest, taxes, depreciation and amortization) level. Debt has resulted on a higher interest cost. At the Ebitda level, all these channels are positive, except in the general news space, where they are marginally negative. Carriage fee has been a huge drag on the P&L (profit and loss statement) of these companies. But it is important for us to retain our leadership position to drive strongly into the digital era, where the carriage fee is likely to come down and revenue is likely to go up.
Our challenges are two. One, we have taken a decision to continue investing in e-commerce and the Internet. The other challenge is that the company has come into a huge investment phase during the slowdown. Therefore, the balance sheet has been leveraged. You need to separate operations from the balance sheet.
But we are committed to shareholders that we will wind down the debt either through the sale of some of the assets we have or through some other mechanism.
By offloading equity in the company?
Sale of assets includes everything. Our desire is to raise resources to wind down our debt. We have certain non-strategic stakes such as Yatra in our portfolio and certain non-core assets, which we could look at divesting and use that cash to pay down debt.
Your shares haven’t performed well either.
It’s the debt overhang on the company, which we are committed to resolving.
You continue to focus on valuations rather than profit.
The whole industry is suffering from an infirmity. If you remove carriage fees, we actually make a lot of profit. Analogue cable has led to carriage fee. This distortion has cost the industry hugely over the last five years. If you remove this distortion, you will find that the television business is the most profitable business in the market today.
But the news business is not profitable.
No. As a percentage of their cost, news channels pay a huge carriage fee. They are extremely profitable.
But digitization may not improve things as even DTH (direct-to-home) providers charge a carriage fee.
They charge new players. I don’t think they charge the networks. Anyway, I am not saying the carriage fee will be zero the next day. If the industry gets aligned, everybody’s focus will be on increasing consumer Arpu (average revenue per user). Today the war is within the industry.
What sense do distribution joint ventures such as Media Pro and Sun18 make?
All alliances are a response to the lack of infrastructure. They are not structures that would have existed otherwise. There are no such cross-network bouquets that are so large anywhere in the world. The real alignment should have happened within the value chain—broadcaster, MSO (multi-system operator), LCO (local cable operator) and the consumer. We are paying each other’s bills. Nobody is charging the consumer.