Tatas in talks with 21st Century Fox to sell Tata Sky stake
NEW DEAL Fox looking to consolidate its position globally
MUMBAI: Tata group has begun discussions to sell an additional stake in Tata Sky, its direct-tohome (DTH ) television arm, to joint venture partner TwentyFirst Century Fox Inc, two people aware of the development said.
The media and entertainment company controlled by billionaire Rupert Murdoch owns a close to 30% stake in Tata Sky, through its investment arm Network Digital Distribution Services LLC (NDDS), and is keen to increase it, the people cited above said on condition of anonymity.
“Fox is looking to consolidate its position and control in several markets, and has made repeated attempts to take over BSkyB, a television and broadband services provider in the UK,” one of the two said.
India is already the largest DTH market in the world by number of subscribers, this person said. India has 94.61 million DTH subscribers and Tata Sky had a 21.52% market share as of December 2015, according to the Telecom Regulatory Authority of India data.
The Economic Times reported earlier this month that the Tata Group and Bharti Enterprises had held exploratory talks to evaluate a mega alliance involving their telecom, overseas cable and enterprise services, and direct-to-home TV businesses. The inclusion of Tata Sky is just to sweeten the deal for Airtel, which has its own DTH unit, Mint reported on July 12.
Significantly, while govern- ment regulations allow 100% foreign direct investment in DTH, there continues to be a 20% cap on foreign investments in media cross-holdings, which could be a potential deal breaker since News Corp, another Murdoch company, owns the Star TV network in India.
But people cited above said a precedent exists for such a deal, given that NDDS already has a 30% stake in Tata Sky, and the two sides will approach the government for approval if the ongoing discussions are successful.
An email sent to Fox remained unanswered as of press time.
A Tata Sons spokesperson said: “We do not comment on speculation.”
Tata Sky started operations in 2004 as an 80:20 joint venture between Tata Sons and NDDS. In 2008, Singapore’s Temasek Holdings Pte Ltd acquired 10% of Tata Sky. In 2010, NDDS was indirectly allowed to increase its stake in Tata Sky by 10% although foreign investment in the sector was capped at 20% at that time.
NDDS then, according to media reports, had approached the Foreign Investment Promotion Board (FIPB) for approval to invest ₹324 crore to take a 49% equity exposure to the Tatas’ investment arm, TS Investments, which in turn acquired a 20% stake in Tata Sky. It owned 29.8% of the company’s equity capital and Tata Sons owned 51.69% as of September 2016.
In fiscal 2016, Tata Sky reported a net profit of ₹80 crore on operating income of ₹4,472 crore — significantly lower than ₹267 crore it made on operating income of ₹3,723 crore in fiscal 2015, company filings show.