With the government approving up to 74 per cent foreign investment in the cable and direct-to-home (DTH) services, international players, both strategic and private equity, are eyeing the Indian market zealously.
The top players who had done due diligence but refrained from investing in India include Comcast Ventures, private venture capital affiliate of Comcast Corporation which invests in media and entertainment, Liberty Media, an American media conglomerate that invests in media and telecommunication, and Time Warner Cable, which focuses on investment opportunities that helps Time Warner meet its goals.
Also, private equity players such as Blackstone Group and Providence Equity Partners, a global private equity investment firm focused on media and entertainment that recently picked 17.3 per cent stake in cable distribution company Hathway Cable & Datacom, may want to have a share of the distribution space in India.
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“India is the second-largest market for cable and DTH after China. All major players would want to come to India. Earlier, due to restrictions, we could not offer them majority control. This stopped players like Comcast and Time Warner from entering India. Now the roadblock is clear,” a top executive of a cable firm said.
However, industry insiders said the change would not take effect immediately and strategic investors would adopt a wait-and-see policy during the first phase of digitisation.
Private equity players may jump in first. Also, strategic investors will wait to see if cable is gaining traction or DTH.
On Friday, the Manmohan Singh-led United Progressive Alliance (UPA) government had announced an increase in FDI in broadcasting services, such as DTH and cable, up to 74 per cent, up from 49 per cent.
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While announcing the revised FDI norms, the minister for commerce & industry, Anand Sharma, had said, “Keeping in view the convergence of the telecom and broadcast sectors, FDI cap has been made uniform across broadcast services. For mobile TV, where there were no norms, 74 per cent FDI would now be permitted.”
The move was strongly supported by the industry. Uday Shankar, CEO of STAR India and the president of the Indian Broadcasting Federation, said: “It is a transformational move as the government has now provided the resource engine to make digitisation a reality. To digitise over 110 million homes, the industry would require $20 billion; this cannot come from only domestic resources, and there is money available from foreign investors."
The Ministry of Information & Broadcasting has set a sunset date of 31 December, 2014 for digitisation of analogue cable households across the country. The investments required for completing the digitisation process is estimated to be Rs 24,000 crore, which includes induction of hardware as well as consolidation costs in the industry.
According to industry estimates, there are around 135 million cable and satellite households in the country, of these 35 million households have DTH services, 90 million analogue cable and seven-eight million digital cable TV services.