The Tata Group and Bharti Group are on the brink of a groundbreaking merger of their DTH services, Tata Play and Airtel Digital TV. This strategic move comes in response to the significant financial losses both companies are facing as viewers increasingly flock to digital streaming platforms.
As reported by ET Telecom, this merger will involve a share swap, with Airtel set to hold a commanding 52-55% stake in the new entity. This reflects a larger trend in India as consumers pivot from traditional television to online alternatives.
Background and Ownership Insights
The merger discussions gained traction in an ET Telecom report dated October 8, 2024. Tata Play, originally known as Tata Sky, started as a joint venture with News Corp, whose stake was acquired by The Walt Disney Company in 2019. With this merger, Airtel will gain access to Tata Play’s impressive 19 million households, aligning with its goal of integrating telecom, broadband, and DTH services.
Key Merger Details
- Ownership: Airtel will have 52-55%, while Tata Play shareholders, including Disney, will hold 45-48%.
- Valuation: The combined valuation is projected between Rs. 6,000 crore and Rs. 7,000 crore.
- Leadership: Airtel’s senior management will oversee operations, with Tata requesting two board seats.
- Subscribers: The merged entity will boast a substantial base of 35 million paid users by September 2024.
- Revenue: FY24 revenue is expected to exceed Rs. 7,000 crore, with Tata Play adding 500,000 broadband subscribers.
A non-binding agreement is on the horizon, with due diligence to follow. An industry executive remarked, “Partnering with a familiar group aims to resolve Tata’s prolonged issues swiftly.” Notably, Disney will retain its shares without a cash buyout.
Industry Trends and Challenges
This merger marks the second significant DTH consolidation in a decade, following the Dish TV-Videocon d2h deal in 2016. The pay-TV landscape is shrinking, driven by free services like DD Free Dish and the rise of streaming platforms. A recent TRAI report revealed a drop in DTH subscribers from 70 million in FY21 to 60 million by September 2024, leading analysts to predict inevitable consolidation.
As Airtel aims to transition Tata Play’s top DTH users to broadband, it seeks to enhance revenue per user. However, regulatory challenges loom large, with Bharti Telemedia facing substantial disputed license fees and Tata Play confronting its own financial demands.
The changing market landscape sees DTH providers integrating OTT platforms to retain subscribers. However, telecom giants like Airtel may leverage their scale to dominate the market. As Tata Play’s valuation declines amid rising losses, this merger appears to be a timely and practical solution.
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