Siti Cable Network Ltd, part of media baron Subhash Chandra’s Essel Group, has decided to fully or partly acquire seven local cable companies to beef up its subscriber base as the government pushes ahead with its cable TV digitization plan.
The company will acquire 100 per cent of Variety Entertainment Pvt Ltd and the 49 per cent stake it doesn’t already own in Siti Faction Digital Pvt Ltd and Siti Jony Digital Cable Network Pvt Ltd, it said in a statement. It will also acquire 76 per cent of Mumbai-based SCOD 18 Networking Pvt Ltd, and 51 per cent each of three companies including Gujarat-based Sai Star Digital Media Pvt Ltd.
Siti Cable, which claims to have 11 million subscribers on its network, said it will complete the transactions by the end of March. It didn’t disclose the deal values for two of the seven companies. The total transaction amount of the five firms is a tad more than Rs 6.5 crore (less than $1 million).
“After being the market leader in the east, north and central parts of the country, we wanted to gain a good position in the western market where we are at No. 3,” said VD Wadhwa, CEO, Siti Cable. “The acquisition of Sai Star and SCOD 18 allows us to consolidate our position in this market.”
The Sai Star deal will help Siti Cable double its subscriber base in Gujarat to about 1.5 million. The buyout in Mumbai will help Siti Cable take it subscriber base to 550,000 from 200,000. Of this, 250,000 are digital TV users while the remaining are analog cable subscribers.
The move comes at a time when multi-system operators, or MSOs, such as Siti Cable are looking to add subscribers in the wake of the implementation of the third phase of the government’s digital addressable system (DAS). Siti Cable, which competes with bigger rivals Den Networks Ltd and Hathway Cable and Datacom Ltd, is one of the first MSOs to acquire smaller local players.
The first and second stages of the government’s digitization plan were implemented in metros and bigger cities while the third and fourth stages will cover other urban areas and rest of the country, respectively. The deadline for the third phase was December 31, 2015, while that for the fourth stage is December 31 this year. However, at least five states — Maharashtra, Andhra Pradesh, Telangana, Sikkim and Tamil Nadu — have managed to get a court-ordered stay on implementation of the third phase.
Still, industry observers say the time has come for consolidation in the segment. “The cable TV business in India is highly fragmented. The only way to grow the subscriber base is either by acquiring a local cable operator or by forging an alliance with one,” said Jehil Thakkar, partner and head of media and entertainment at audit and consulting firm KPMG in India.
In a separate development, Siti Cable said its board has cleared a proposal to raise Rs 680 crore by issuing warrants and optionally fully-convertible debentures (OFCDs) to its promoters. If the promoters convert all warrants into shares, their stake would go up from 66 per cent to 72 per cent. Also, if they choose to convert OFCDs, then their stake would rise to around 74 per cent, just short of the 75 per cent cap fixed for listed companies.
According to Wadhwa, the company will use the amount to be raised to repay a term loan while non-debt funds will be used to fuel expansion plans.