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DEN JVs raise a banner of revolt

MUMBAI: The top joint venture partners of DEN Networks are an angry lot. Raising concerns about future funding, stake dilution and centralised carriage and subscription deals, they have formed an association to put forward their demands to DEN Networks chairman and managing director Sameer Manchanda.

DEN India JV Association has been set up ahead of digitisation in Phase III and amid the multi-system operator’s (MSO) drive to streamline processes that would give it more control.

Concerned about their future with DEN, around 20 JV partners met in Delhi to chart their future course of action. During the two-day meeting, they shared their views on the way things are moving.

“Why should we invest in Phases III and IV when there is no valuation gain for us? While DEN Networks is growing and raising funds, we as JV partners have not gained despite having invested in the business. How do we benefit from stake dilution? We need clarity on a lot of issues,” Ravi Singh, president of DEN India JV Association, told TelevisionPost.com. Singh is also a JV partner in DEN Satellite Network.

The JV partners are planning to write to Manchanda listing out their grievances. They also intend to meet the CMD next week to seek more clarity on the way JVs are to function.

 Friction Areas

  • Stake dilution
  • Valuation formula
  • Funding for Phase III and JV or distributor model
  • Centralised carriage and subscription deals
  • Common policy on Star channels
  • STB pricing and interest rates
  • Move comes ahead of Phase III and amid MSO’s drive to streamline processes
  • Reliance Jio Media to enter MSO biz

“There is some discomfort with the DEN management. Our demand is that we should grow along with the company, why else are we investing? We want things sorted out so that we can plan for Phases III and IV of DAS,” Singh said.

Incidentally, DEN has decided not to take the JV route on most occasions in Phases III and IV of digital addressable system (DAS).

“We do not want to work as distributors. If we are to be their JV partners in Phases III and IV, we need to know how the funding is to be made. We want to dilute our stake so that we can keep pace with the funding,” said Singh.

Sanjeev Dixit, secretary of DEN India JV Association, wants the management to reveal to the JV partners the stake valuation formula. “DEN’s subsidiaries will need funding for Phases III and IV. They (DEN management) should let us know about how the valuation is being arrived at so that there is a common approach when they buy our stakes. The argument can be that the JVs are at different value levels and strategic worth, but the management can specify the different ways that valuation is being done,” he said.

Dixit, a JV partner in DEN Ambey Cable Networks, recently diluted around 10 per cent stake to DEN Networks.

Ravi SinghAccording to Singh, the JV partners want to dilute their stakes to fund DAS. “They (DEN) are diluting and raising funds for growing the business, but what should we do to fund our business? We also want to dilute. We are asking them to buy our stakes,” said Singh.

The JVs are unsure whether their investments will yield any result. “If the value of our stake doesn’t increase, then why should we invest money? What is the exit route for us? Extracting revenue from the ground will take time and we need to enjoy the value that we have already built,” he stated.

Another point of friction is centralised carriage and subscription deals with broadcasters. This trend started a couple of years back and the management has stuck to this process more firmly.

“We were at least part of the process then. Now we have no wind of what the deals are like. There is no transparency. We want a member of the association to be part of the team that decides on carriage and subscription deals,” said Dixit.

The issue has magnified after Star India went into RIO (reference interconnect offer) deals with MSOs. This meant that the Star channels would be taken a la carte and discounts would be given based on penetration of these channels.

“DEN did not have a common policy on the Star channels. In some areas, they said we should do packaging while in other cities they went with a la carte. They did not take us into confidence. We are not against centralised deals if we benefit commercially from it, but we want transparency,” said Singh.

The pricing of set-top boxes (STBs) is another issue. “The interest rates on the STBs vary and also there is no common pricing for all the JV partners. This issue should be addressed,” said Singh.

DEN Networks CEO Pradeep Parameswaran could not be reached for comment.

In the fiscal ended 31 March 2015, DEN’s content cost increased 25 per cent over the year-ago period to Rs 464.52 crore (Rs 4.6 billion) while carriage revenue grew marginally by 1.9 per cent to Rs 474 crore (Rs 4.7 billion).

DEN has taken steps to improve its subscription revenue collections from the local cable operators (LCOs). The company has also taken measures to bring about better operational efficiencies.

The existing MSOs will have a new competitor in Reliance Jio Media. The subsidiary of Reliance Jio Infocomm has applied for an MSO licence and is awaiting government approval. The company has tapped former Hathway MD & CEO K Jayaraman as its CEO while former DEN Networks’ CEO SN Sharma is also part of the top leadership team.

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