Dish TV-Videocon d2h merger will lead to cost synergy of Rs 1270 cr in FY19-20

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MUMBAI: The merger of direct to home (DTH) operators Dish TV and Videocon d2h, which is in its final leg, is expected to bring cost synergy of Rs 1270 crore in FY19-20.

The synergy will be under five major heads including set top box (STB), interest expenses, administration expenses, content and back-end services like call center.

Of the Rs 510 crore synergy in FY19, the combined DTH entity is expected to save around Rs 110 crore on STBs, Rs 75-80 crore in interest expense, and Rs 45-50 crore on the backend operation. The balance synergy will come from content cost and other residual savings.

The synergy for FY20 will be on similar lines as FY19. Earlier, the companies had pegged the cost synergy of Rs 1.8 billion in FY18 and Rs 5.1 billion in FY19.

“As far as synergy is concerned, we remain intact with the figure of Rs 510 crore in FY19 and we have estimated it will be around Rs 760 crore in FY20. The Rs 510 crore will be coming out of the 5 major heads: STB, interest expenses, administration expenses, content and back-end services like the call center,” said Dish TV CFO Rajeev Dalmia.

He further added, “Out of these, the STB cost will be around Rs 110 crore, the interest will be around say Rs 75 to 80 crore and the back-end operation will be Rs 45 to 50 crore and the balance will be out of content and other residual savings that will arise because of the merger and the same analogy have been applied in FY20 also.”

Explaining the higher synergy savings in FY20, Dalmia said that the Rs 510 crore will flow into FY20 also, therefore, the additional amount in FY20 is only Rs 250 crore. “It will anyway come because of the large number of subscribers and some more synergy in the back-end services which is consuming around 350 crores in both the companies now,” he noted.

Dalmia also noted that the net debt of Dish TV is Rs 810 crore as on 31 December while that of Videocon d2h is Rs 1,350 crore.

The DTH licence fee provision in Dish TV’s books is around Rs 950 crore while Videocon d2h’s licence fee as part of contingent liability is around Rs 575 crore.

He also stated that the appointed date for the amalgamation scheme is likely to be 25 or 26 February.

Dish TV and Videocon d2h had earlier said that the companies will file the relevant intimations/E-Forms with the registrar of companies (ROC), ministry of corporate affairs (MCA) in the last week of February 2018 to complete the merge.

On 15 December, the ministry of information and broadcasting (MIB) had approved the merger between the two companies.

In November 2016, Dish TV and Videocon d2h had decided to merge to create a distribution behemoth.

The merged entity Dish TV Videocon would have a whopping 29 million subscribers in India as per its combined share on 30 September.

As per the transaction, Dish TV Videocon will issue 857.79 million fresh shares as a consideration with Videocon d2h shareholders getting 2.02 shares in Dish TV Videocon for every 1 share.

Post-closing, Dish TV shareholders will own 55.4% of Dish TV Videocon and Videocon d2h shareholders will own 44.6%. The merged entity will be the second largest listed media company after ZEEL with revenues of Rs 60.8 billion.

It will also become the second largest distribution platform in the world. The merged entity will have 16% share of the TV distribution market.


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