Broadcast carriage industry to see 100% FDI via automatic route

New Delhi, June 20: The government on Monday allowed 100% foreign direct investment (FDI) through the automatic route in the broadcast carriage industry. The sector comprises teleports, cable industry, direct-to-home (DTH) players, headend-in-the sky (HITS) and mobile TV operators.

The move brings relief to the cable industry which has been struggling with the process of digitisation of cable TV. According to industry estimates, 61 million TV households come under phase 4 of digitisation of cable TV. Of this about 40%, that is nearly 25 million households, are already digit is ed through D TH services provided by Door dar shanan dot her players, including Tata Sky and Dish TV. So, around 40 million TV households are yet to go through the process of digitisation.

While in case of phase 3, of the 40 million TV households which were to be digitised, 10 million homes are still left. According to a study by ratings agency Crisil, DTH operators need to invest around `13,700 crore over the implementation period, while for multi-system operators (MSO), the capital expenditure required is about `8,300 crore.

The move will allow the cash-strapped cable industry to get foreign investors who will help MSOs expand in rural markets. Phase 4 market essentially includes rural India, for which fibre optics lines need to be laid down. In addition to implementation of new set-top boxes, some of the old boxes are required to be replaced by high-definition set-top boxes.

“Digitisation of TV distribution requires large investments of infrastructure, with long-term return timelines to manage on-ground realities. Higher FDI will enable healthier balance sheets and help speed up the process of digitisation. It will also bring in leading global practices and enable greater transparency,” said Ashish Pherwani, partner and head (advisory), media and entertainment, EY, an audit firm.

“Once digital addressable system (DAS) is implemented across the country, it will pave the way for the entry of internationalgiants such as Com ca stand Time Warner,” said Ashok Mansukhani, wholetime director at Hinduja Ventures.

As there is a focus on increasing the number of channels shown by cable operators as well as DTH operators to about 900-1,000, the move will help in bettering the infrastructure by increasing satellite capacity. However, the move hasn’t had much of an impact in case of DTH players such as Tata Sky — a joint venture between Tata Sons and Rupert Murdochowned 21st Century Fox. While Tata Group owns 51%, Murdoch’ s 21 st Century Fox has 30%, Singapore state investor Temasek 10% and Tata Opportunities Fund holds 9%.

“While we have seen financial investors showing interest in investing, we are keen about long-term investors who also bring knowledge to the table. Unless Trai recommendation to remove the cap is implemented, not much can be expected ,” said H ar it N ag pal, managing director and CEO, Tata Sky.

In 2014, the Cabinet under the had imposed a 20% restriction on cross-media holdings. Last year, James Murdoch, CEO, 21st Century Fox, had talked about the company’s interest in increasing equity in the firm.

As for mobile TV, there is no implication of the F DI. With mobile TV now being replaced by new technology such as overthe-top (OTT) platforms, including Hotstar, Spuul and Hooq, which don’t require a licence to operate, large players such as Net fl ix, Amazon Prime and Hulu from the house of 21st Century Fox were allowed to acquire independent players before the relaxation of FDI.

Yet independent players such as To The New Venture which runs OTT platforms such as #Fame, feel with this directive, it will become easier to find investors or tie up with an international player to be able to grow in the already over-crowded video OTT space in India.

“Setting up regulation at a right time like this, when the industry has started to grow with new players coming in is better than doing it before it gets chaotic,” explained Puneet Johar, CEO, To The New Ventures.

Earlier, a foreign investor was allowed to acquire 49% stake in these sectors through automatic route, and beyond this, the government’s (FIPB) approval was required