New Delhi: Mukesh Ambani-owned Reliance Industries Ltd (RIL) looks at a major opportunity to scale up and take on industry rivals as it announced the merger of its media and distribution businesses spread across multiple entities into Network18. With listed companies such as Zee Entertainment Enterprises Ltd and Sun TV Network as its competitors, RIL could enhance to an integrated media and entertainment company with revenue of ₹80 billion, emerging as one of the largest media entities in the country after the Star network at Rs. 120 billion.
Under the Scheme of Arrangement approved on Monday, TV18 Broadcast, Hathway Cable & Datacom and Den Networks will merge into Network18 Media and Investments. The broadcasting business will be housed in Network18 and the cable and ISP (internet service provider) businesses in two separate wholly-owned subsidiaries of Network18.
“This is a big consolidation move that will improve the company’s bargaining power especially with respect to its television channels that will receive wide distribution," said Karan Taurani, research analyst with Elara Capital Ltd, adding that benefits of scale and size to RIL will be evident in the next six-to-12 months. According to a statement from the company, Network18, along with its affiliates, will now have 13% share of the TV viewership in the country with 56 channels across news and entertainment, spanning 15 languages. It will also command 12.5% share of India’s cable and satellite pay-subscriber base and 6.7% share of the country’s wireline broadband subscriber base.
Abneesh Roy, senior vice-president (research), Edelweiss Securities said one large entity versus four small entities becomes more attractive to investors.
“This will also simplify the corporate structure of the group by reducing the number of listed entities from four to one in the media space. Network18 will become net-debt free at the consolidated level providing a solid base for growth as well as improved shareholder returns," Roy said.
Further, the consolidation of the cable businesses of Den and Hathway in one entity will leverage the combined strength of the 27,000 LCO (local cable operators) partners who act as touchpoints to around 15 million households in India and one million broadband subscribers. Merging the businesses will also lead to better cash flow management within the company, with the entertainment ventures generating free cash flow which could in turn be utilized by the distribution businesses.
While Roy said disclosure levels would need to be high given diverse media businesses in one listed entity, Taurani said the other challenge could emerge in the form of LCOs resisting the consolidated power of one broadcast network when it comes to issues like the new tariff order (NTO).
Amendments to the NTO brought out by the Telecom Regulatory Authority of India (TRAI) earlier this year are currently being contested in court by television broadcasters, with one of the issues being that distribution platform owners and cable operators will be able to charge as much as ₹160 for channels that were supposed to be free.