Talks under way for partnership model to provide last-mile connectivity to 4G users.
Reliance Industries (RIL) is planning to pick up a minimum 26 per cent stake in leading cable operators, including multi-system operators. The move is a part of the group’s strategy to rope in cable operators as well as multi-system operators (MSOs) as partners to provide last-mile connectivity to consumer homes for 4G broadband services, which would include data, voice and television.
According to two independent sources, RIL has approached Den Networks, Digicable Networks, Hathway Cable, the Hinduja–promoted IndusInd Media and Communications Ltd (InCable) and several independent MSOs as well as smaller operators with good regional presence. There are more than 6,000 cable operators in the country.
The move comes shortly after RIL decided to invest in media group TV18's two main companies through rights issues. The deal would give RIL access to content for its 4G broadband internet venture.
RIL had last year bought 95 per cent stake in the Mahendra Nahata-promoted Infotel Broadband Services Ltd (IBSL), which won broadband wireless access or 4G spectrum across the country.
Elaborating on its strategy, an RIL spokesperson said Infotel was engaged in bringing affordable, cutting-edge wireless broadband and broadband-enabled digital services to customers across the country. To support this business model, Infotel is pursuing an economically prudent strategy of deploying a judicious mix of owned and partnered assets. In this context, the spokesperson said, Infotel had, and continued to be, engaged in discussions with potential partners where a partnered approach could create win-win opportunities for the company, its customers and partners.
RIL, however, did not want to comment on specific names, given the “strategic and confidential nature” of the discussions.
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The MSOs and cable operators also declined to comment on talks with RIL. Sameer Manchanda, chairman and managing director of Den Networks, Ravi Mansukhani, managing director of Indusind Media, and K Jayaraman, CEO of Hathway Cable & Datacom, declined to comment on the issue.
With the government setting a deadline for digitisation by 2012 in metros and by 2014 across the country, cable operators and MSOs would require a massive investment of Rs 25,000 crore.
Den Networks plans to invest Rs 1,500 crore over three years and Hathway had said it would invest Rs 500-600 crore on cable digitisation in the first phase. According to analysts, most MSOs have chalked out huge fund-raising plans for digitisation, including stake sales.
According to a KPMG report on the media and entertainment industry, there were 103 million cable homes in 2010. Of those, 68 million were connected by analogue cables, while 28 million used DTH and five million switched to digital cable.
With RIL planning to roll out 4G services, tying up with MSOs will help them both in data and content options. That will help them in mass-scale adoption of their technology. In one go, most households will get internet and content on several devices from television to tablets. For RIL, this makes sense as MSOs have last-mile access to customers, says Farokh Balsara, leader of media and entertainment practice at Ernst & Young (Europe, India, Middle East and Africa).
RIL watchers say the company has put together an elaborate 4G broadband wireless access (BWA) roll-out plan that will offer consumers speeds 5-10 times better than 3G.
RIL has ambitious plans to connect over 100 cities and towns across the country through a fibre optic network (partly of its own and partly leased) in the initial stages. Cable operators and MSOs together have already laid 100,000 km of fibre reaching consumers’ houses across the country. That is what RIL wants to leverage.
The senior Ambani may have to tackle some regulatory issues of cross-holding under which cable, broadcasting and DTH companies cannot hold more than 20 per cent stake in each other. It was for this reason the Anil Ambani-promoted RCom, which operates in the DTH space through Reliance Digital TV, internet protocol TV (IPTV) and broadband services (all come under Reliance Digicom), was unable to acquire cable company Digicable. The government had earlier looked into the structure of Sun TV and the Zee group as both are present in an array of areas — cable distribution, DTH and broadcasting. But, they got clearance.