Sony set to buy ETV's channels

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3 Nov 2010
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Biggest media deal for $500-600 million to give
Sony a bigger share of regional pie. In what will be the largest media deal in India,
Multi-Screen Media (MSM), which runs Sony
Television in India, is set to buy Ramoji Rao-owned
Eenadu TV’s (ETV’s) bouquet of 11 regional
channels. According to four independent sources, the talks
are at an advanced stage and an announcement is
expected shortly. The deal size is expected to be close to $500-600
million (Rs 2,250-2,400 crore), eclipsing
transactions such as Disney’s strategic investments
in UTV, Turner’s buyout of NDTV Imagine from New
Delhi Television and Viacom teaming up with
Network18, which runs India’s version of CNBC. MEDIA MATTERS (Top deals in media and entertainment) Company Investment Deal size TimeWarner NDTV Imagine 126.5 Disney UTV Software 220
approx News Corp ABP and Asianet NA Bloomberg UTV news channel NA Standard Chartered
IL&FS Asia Fund DEN Networks Ltd 400.58 Oman Investment Fund,
3i Group Plc NEO Sports Broadcast
Pvt Ltd 51.6 Temasek, New Vernon,
Kotak, New Silk Route 9X media 150 Nimesh Kampani Ushodaya Enterprises 578 Source: VC Edge & industry sources (figures in $ million) The deal will give Sony a nationwide regional
platform to take on rivals STAR and Zee. Apart from having a pan-India presence, ETV’s
infotainment channels also reach out to Indian
diaspora in the US, providing digital entertainment
via ETV Telugu, ETV Bangla and ETV Gujarati
entertainment channels. ETV’s regional channels have had an interesting
model of clubbing news and entertainment. The MSM spokesperson told Business Standard the
“company will not comment on market
speculation”. Eenadu Group’s Managing Director
and Ramoji’s son, Kiron Rao, did not respond to
email queries. The group’s media officer refused to
comment. E&Y is believed to be advising Eenadu. Sources in the know say the deal will be in tranches
and will allow investors such as Nimesh Kampani of
JM Financial to exit. In 2008, Kampani, one of
India’s savviest deal makers, came on board of
Ushodaya Enterprises, the publisher of the flagship,
Eenadu, the largest-selling Telugu newspaper. Ushodaya also doubles up as the holding company
of Ramoji Rao’s media empire spanning
newspapers and television. Kampani’s structured transaction — which included
debt and equity — valued at Rs 2,600 crore for
close to 40 per cent stake had helped Ushodaya
wriggle out of another deal the Rao family was
planning with private equity player Blackstone
Group to sell a 26 per cent stake for $275 million (Rs 1,080 crore). Ushodaya has three divisions, Eenadu Publications,
ETV Network and pickles and food company Priya
Foods. The group has diversified rapidly into film
and TV production and distribution, financial
services, garment manufacturing and hospitality. It
also owns a 1,600-acre Ramoji Film City. According to analysts, for the nine months ended
December 2010, Ushodaya reported a profit after
tax of Rs 13.2 crore on an income of Rs 1,062
crore. TV contributed 37 per cent revenue. The
publication division contributed the highest (40 per
cent). With Sony buying the TV business, Ushodaya will
get money, which will help the Eenadu promoters
redeem preference shares and debentures, giving
Kampani an exit option. Blackstone and Kampani were embroiled in a
political jam, which even led to Kampani being
hounded out of the country after lookout notices
were issued against him at major international
airports. Eenadu is a fierce competitor of Sakshi, the
newspaper of former chief minister Y S R Reddy’s
son, Jagan Reddy. But a deal with Sony would have
violated the 26 per cent foreign direct investment
cap on news operations. Which is why, sources
said, Eenadu had to phase out its hourly news capsules. ETV also runs a 24-hour Telegu news channel,
ETV2, which will not be sold to Sony. Sources said for news TV, talks with TV 18 might be
revived. TV 18, said a source, was approached first
for the entire TV business. The talks did not fructify. MSM runs six channels, Sony TV, SAB TV, Set Max,
Sony Pix, AXN and Animax, and has a 15 per cent
market share in the Hindi general entertainment
space. From a premier position, it has slipped,
hamstrung by an ongoing dispute with minority
shareholders, inconsistent programming and a not- so-successful relaunch with Yash Raj Television. Despite having some of the biggest properties —
IPL, Kaun Banega Crorepati and Indian Idol — Sony
has been edged out of the top three slots,
especially by late entrant Viacom 18, which
launched the hugely popular Colors in 2008. Sony is no stranger to doing deals to scale up. It
bought Sri Adhikari Brothers (SAB) TV to have a
second-line general entertainment channel to
compete with STAR One. Hindi comedy and light
entertainment channel SAB TV has been a huge
success. But Sony’s regional play has been small. It
branched out in the Bangla general entertainment
space, but with limited success. Eenadu, therefore,
gives it the right platform to be a formidable
national and regional broadcaster. According to a Ficci-KPMG report, regional general
entertainment accounts for over 25.06 per cent of
the Rs 8,000 crore-plus TV advertising pie with a
viewership share of 27.3 per cent. Sony’s competitors STAR India and Zee
Entertainment have a strong presence in the
regional general entertainment space. STAR has
STAR Vijay, STAR Pariah, STAR Balsa and Asianet.
Zee, on its part, has eight regional channels.
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