The satellite radio service WorldSpace, Inc., which had India as one of the fastest growing markets, has filed for Chapter 11 bankruptcy. The company has listed a debt of $2.1 billion and assets of $307.4 million as of June 30, 2008.
Worldspace has more than 90 per cent of their subscriber base in India. According to a report, as of March 2008, the company had 172,000 subscribers in India, which it acquired in the last four years. The downfall of the radio service may have been becasue of the low renewal rate of the subscribers.
Worldspace is a paid service. The initial cost includes a special satellite radio-set that costs about Rs 2,350, and a subscription fee starting from Rs 1,000 (for six months) to Rs 3,250 for two years.
In India, where FM radio is avaliable for free, the subscriber growth and renewal could have taken a hit. VCCircle could not contact Worldspace India for a comment.
The service is offering over 40 channels including 10 regional language channels and some specialised channels on spirituality, rock and classical music, news channels among others. It’s not clear now how many users are currently with the company and if they would continue to provide the services.
The company claims to have over 74 business associates and over 2,000 retail outlets across the country. The fate of their business relationship with Worldspace is also uncertain.
WorldSpace has sought bankruptcy protection so as to be able to raise fresh funds to repay its debts. The move covers its all US subsidiaries (which include WorldSpace Systems Corporation and AfriSpace, Inc.) as well.
The board of directors of WorldSpace agreed that Chapter 11 reorganisation is required for the company to raise capital to repay its senior secured and convertible notes. The available options with Worldspace include an all out sale of the company and its assets if it is unable to raise sufficient capital.
However, it will continue to operate its business and manage its assets as a “debtor-in-possession” under the jurisdiction of the court and in accordance with the applicable provisions of the Bankruptcy Code. It will also continue to pay its employees. The creditors have agreed to provide a financing facility of up to $13 million for 90 days, in order to facilitate a sale.
WorldSpace has presence in more than 130 countries and is a pioneer of satellite-based digital radio services (DARS). It launched its India services in 2000 with over 35 free-to-air channels. In 2002, it converted a few of its channels to pay and went completely pay in 2004.
In January this year, it had secured a financing facility for up to $40 million of subordinated financing, from Yenura Pte. Ltd., a company controlled by Noah Samara, chairman and CEO of Worldspace. Yenura is a special purpose entity established by Samara and Salah Idris to invest in Worldspace.
In July 2008, WorldSpace had unveiled “1worldspace” as its new corporate identity and brand, and launched a re-designed company website to showcase the new positioning.
WorldSpace had also been eyeing a strategic alliance with a local partner. It also had plans to integrate ‘mobile’ receivers in cars for which it was in talks with car manufacturers.
With this move, the fate of its 163,000 Indian subscribers is in lurch, though India is their key market, as they have only 11,000 subscribers in the rest of the world (Europe, the Middle East, and Africa).
As speculations in market go, it can be a good buy for a company like Reliance owned BIG FM.