Reliance ADAG to sell up to 49% in DTH business

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The Reliance Anil Dhirubhai Ambani Group is planning to sell up to 49% stake in its DTH venture Reliance Big TV in a deal which could raise R2,000-2,500 crore, two persons close to the development told FE. The Group is open to selling the stake to one or more investors, domestic or foreign, soon after the imminent hike in foreign direct investment (FDI) cap in DTH to 74%. The transaction, if it goes through, will be the biggest deal yet in India's six-player DTH market.

Among likely buyers are a bunch of overseas private equity investors and broadcast & cable companies including Comcast Corporation, the largest cable operator, home internet service provider and the fourth largest home telephone service provider in the US. Sources said a team from Comcast has already held talks with Reliance Big TV in Mumbai.

ADAG could consider sale of an even higher stake to a strategic investor if it is able to fetch an attractive price, these persons said. As of now, there is no FDI in Reliance Big TV valued at R5,000-crore, which is directly owned by the promoters and group firms.

Reliance Big TV has around 4 million gross subscribers and is looking for funds to more than double its subscriber base in next 12-18 months and turn profitable.

Reliance Big TV is the only company among India's DTH operators which does not have a foreign stake. Tata Sky has STAR Group and Singapore-based PE firm Temasek as foreign investors. Sun Direct has partnered Malaysia's Astro. Dish TV and Airtel Digital TV too have overseas partners.

While current norms for DTH operators allow only 49% overseas investment including a 20% FDI cap, the information and broadcasting ministry has approved hiking the overall FDI limit to 74% as recommended by the Telecom Regulatory Authority of India. Sources said the department of industrial policy and promotion is set to move a Cabinet note for a comprehensive hike in FDI across sectors including DTH and digital cable soon.

Sanjay Behl, chief executive officer, Reliance DTH & IPTV declined to comment on the stake sale, merely saying, “DTH is a capital-intensive industry that requires substantial investment. Our four-screen strategy is to dominate mobile, computers, television and cinema, in which we already have significant presence. Reliance Digital TV has among the best Arpu in the industry and higher percentage of active subscriber base which will only become better going forward.”

According to sources, in order to attract strategic investors, Reliance ADAG is leveraging its strength in the media and entertainment space housed under the umbrella of Reliance Entertainment (formerly known as Reliance Big Entertainment), a wholly-owned subsidiary of ADAG.

ADAG is no stranger to forging overseas alliances in media and entertainment. It has roped in US-based CBS as a partner for its broadcast business and has formed a joint venture with Bertelsmann-owned RTL Group to launch English-language channels in India, to be followed by local language outlets. RBNL through its equal JV partner with CBS Inc has launched channels under Big CBS brands while its parent company has licenses for 20 channels expected to be launched through RBNL.
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