Reliance Digital, Sun Direct merger may take a while to happen
Due-diligence may have been on for some time
now on the merger of Reliance Digital and Sun
Direct, but a concrete decision is yet to be taken
on the deal, according to reliable sources. Senior executives at Reliance say they do not
want to comment on speculation and Sun TV
Network officials could not be reached for
comment. But industry sources say it may take a
while to decide this issue, as it calls for a lot of
understanding between the two entities. The two companies have been sharing their
back-end facilities for a couple of years now.
After a technical glitch in INSAT 4B in 2010, Sun
Direct entered into a long-term agreement with
Reliance Digital to share the latter’s bandwidth in
MEASAT 3. “Beyond this, we do not know anything between the two companies,” said an
executive at Reliance Digital. The executive says
there is no official information on this from the
top – not even a word on employees’ status.
“We do not know whether we would be offered
a choice to move to the new entity or to remain with Reliance,” the person said. However, industry observers say that Reliance
Digital has been going slow on subscriber
acquisition in the last several months, and
focusing only on subscriber retention. This is at a
time when the service providers are rapidly
scaling up subscriber base. DTH penetration has been at its fastest following
the Government’s initiative to completely digitise
TV channel distribution by the end of 2014. At
present, the acquisition cost per subscriber is
around Rs 3,000, the six-player DTH industry has
been on subscriber acquisition spree to capitalise on the digitisation drive. Currently, there are over 55 million DTH
subscribers in the country. Of this, Dish is the
market leader with over 15 million subscriber,
followed by Tata Sky with 11.5 million; Sun
Direct 8.5 million; AirTel 8.5 million; Videocon
over six million. Reliance Digital has about four million subscribers. While Sun Direct is a predominant player in the
South, with over 80 per cent of its base in the
region, Reliance Digital’s strength is in the North
and the West. If the deal goes through, it will help Sun Direct
expand into the North and West. However,
considering the current subscriber acquisition
cost, ARPU (average revenue per user) and taxes,
the service provider gets a meagre return on
investment. “Hence, the new entity may have to invest a lot
in subscriber acquisition, without expecting any
remarkable return for 4-5 years,” said a top
official of one of the leading service providers. source
Reliance Digital, Sun Direct merger may take a while to happen - The Hindu Business Line : Mobile Edition
