22 Nov 2017
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Reliance Digital TV gets a new lease of life following RCom-Veecon deal

MUMBAI: Direct to home (DTH) operator Reliance Digital TV has got a second lease of life after Anil Ambani-led Reliance Communications entered into a memorandum of understanding (MoU) with Delhi-based Veecon Media and Television to sell its DTH business to the latter.

Veecon Media & Television was incorporated on 11 January 1996 and has four directors Jaswant Srivastava, Lalit Srivastava, Vijender Singh, and Rohit Rohan. Its authorised capital is Rs 2.5 crore and paid-up capital is Rs 40 lakh.

The DTH business is under a subsidiary company called Reliance Big TV. It is operated under Reliance Digital TV brand.

Earlier, Reliance Communications, which is saddled with a debt of Rs 45,000 crore, had issued a public notice stating that the DTH business will be shut down on 18 November due to the expiry of its DTH licence.

It had even tied-up with rival DTH operator Tata Sky to migrate its existing customers. Not to be left behind, Airtel Digital TV had also come up with an offer to woo Reliance Digital TV customers.

Even as the D-Day was arriving for Reliance Digital TV came the announcement that the DTH operator will be acquired by a little-known company called Veecon.

Pursuant to the transaction, Veecon will acquire the entire shareholding of RBTV with business on ‘as-is-where-is’ basis, along with all existing trade liabilities and contingent liabilities. Incidentally, RBTV owes a lot of dues to broadcasters in addition to other trade partners.

Sun TV Network has already initiated the process of recovering its dues by filing a recovery petition in Telecom Disputes Settlement and Appellate Tribunal (TDSAT). Another petition filed by RBTV against Antrix Corporation is under adjudication in TDSAT.

Antrix had threatened to suspend transponders to RBTV for failure to clear dues of satellite operator Measat. RBTV was directed by TDSAT to make a payment of Rs 7.5 crore in two installments to avoid transponder suspension.

As part of the deal, Veecon will renew the existing DTH license of RBTV by submitting the required Bank Guarantees with the ministry of information and broadcasting (MIB).

RCom said that the transaction ensures that all existing 1.2 million customers of RBTV shall continue to enjoy uninterrupted services. It also ensures the continuity of employment for approximately 500 employees of RBTV, it added.

The telco further stated that the transaction will help reduce the liability of unsecured creditors, benefitting all stakeholders including lenders and shareholders of RCom. The transaction is in consonance with the RCom’s stated objective to focus on B2B businesses of New RCom.

Incidentally, the DTH business is one of the assets it was planning to monetise to cut-down its humongous debt. The company considers DTH as a non-core business.

The successful culmination of the transaction is subject to the requisite approvals from licensors, regulatory authorities, and lenders of RCom.

Reliance Digital TV is the smallest among the six pay DTH platforms in the country with a measly 2% of 65.31 million active pay DTH subscribers, as on 30 June. Dish TV is the biggest DTH operator with 24% share followed by Tata Sky (23%), Airtel Digital TV (21%), Videocon d2h (20%).

Launched in August 2008, Reliance Digital TV is a profitable DTH company as per the last available information for the fiscal year 2016.

During FY16, Reliance Big TV had reported a net profit of Rs 232 crore on a total income of Rs 638 crore. In the FY15, the net profit was Rs 12 crore while the total income stood at Rs 994 crore.

The financial woes of its parent company Reliance Communications meant that the company’s growth had stagnated due to lack of investments.

Even as other DTH operators took advantage of the digital addressable system (DAS) in mopping up customers, Reliance Digital TV’s subscriber share had remained unchanged at 2 percent of the total active pay DTH subscriber base.

The journey for the new buyer will not be a smooth one as the DTH sector is a highly capital intensive business which requires deep pockets.

The sector is also witnessing massive consolidation with the coming together of Dish TV and Videocon d2h and the possible alliance between Tata Sky and Airtel Digital TV.

In a consolidated market, the big distribution platforms will have an advantage in terms of economies of scale. They will also enjoy a better bargaining power with big broadcasters in stitching content deals.

Most of the DTH companies are either owned by big corporate houses like Bharti Airtel, Tata Group, and Videocon Group or large media companies like Zee Group, 21st Century Fox, and Sun Group.

In such a scenario, it will be interesting to see how a little-known company like Veecon will survive in the hyper-competitive DTH business, which is also facing severe competition from Doordarshan’s Freedish and the 4G services launched by telecom operators.