MUMBAI, AUGUST 4: Media firms face proposed changes to broadcasting rules that could limit cross-holdings and crimp consolidation in the world's third-largest cable TV market.
The bill, likely to be delayed as broadcasters lobby the government for changes, would set limits on scale and expansion and bring the $3.6 billion television industry under one regulator responsible for controlling content and issuing licences to more than 20,000 cable operators.
It would cap a broadcaster's ownership in another broadcaster, distributor or cable operator at 20 per cent; limit any broadcaster's ownership to 15 per cent of all TV channels; and cap a cable or distribution firm's subscriber base in any city, state or country at 15 per cent.
Broadcasters can currently own up to 20 per cent in a Direct-To-Home (DTH) satellite network, but there is no ceiling on ownership in cable distribution operations or on market share.
The bill will impact operations of India's largest broadcaster, News Corp.'s Star, as well as Zee Telefilms Ltd. and Sun TV Ltd., which have interests in cable distribution and DTH operations.
"The rules could impact long-term cable consolidation prospects being considered by foreign and private equity investors," said Vivek Couto, executive director at Hong Kong-based research firm Media Partners Asia.
"It could also prove detrimental to long-term acquisition strategies," he said.
LARGE MARKET
Zee Telefilms, India's largest listed media company, has already drawn up plans to spin off its cable distribution arm and Dish TV satellite arm. Chairman Subhash Chandra has said the company will invite strategic investors.
Shares in Zee have risen by more than two-thirds this year, beating a 17 per cent rise on Mumbai's main share index.
Zee aims to more than double Dish TV's subscribers to 2.4 million and targets 3.2 billion rupees ($68 million) in revenue by March 2007. T-Sky, a joint venture of the Tata group and Star, will launch shortly.
Sun TV's DTH launch is on ice after a rocket carrying a communications satellite disintegrated after take-off in July.
Distribution firms including Hathway -- in which Star owns 26 per cent, and INCablenet, which is majority-owned by the Hinduja group, may now be put on the block. Investors are also circling Sun TV's distribution arm, analysts say.
Potential investors may include local and foreign private equity firms and international media firms such as Liberty Media Corp., Comcast Corp., Time Warner's cable unit and Clear Channel Communications Inc.
"It's a large market, and there's a lot of opportunity," said Ashish Kaul, Senior Vice President at Essel group, Zee's parent.
"Digitisation and addressability will happen, if not today or tomorrow, at some point, and then the market will really grow," he said, confirming investors have made offers for Zee's units.
India has a cable TV base of 64 million homes, or 59 per cent of all television-owning homes. But average revenue per user is among the lowest in Asia at just $3.50-$4.50 a month.
Attempts to introduce a pay-TV system that would boost broadcasters' subscription revenues have been stymied by cable operators and politicians, but an Indian court recently ordered the rollout of the conditional access system in parts of New Delhi, Mumbai and Kolkata by the year-end.
MICRO, MACRO
Some analysts believe the new rules could make operations in India's fragmented television industry more transparent.
"It will force companies to streamline their businesses and there will be greater focus, and therefore quicker growth," said Phani Sekhar at Angel Broking.
But the rules may also change what viewers can watch.
The bill proposes that at least 15 per cent of a channel's weekly content be produced in India, which would impact some international broadcasters such as Turner Broadcasting, Discovery and Walt Disney.
The regulator could also suspend a broadcaster's licence.
Television content is at best loosely regulated now. Even prime-time programming on free-to-air channels can sometimes include graphic violence and sex.
But analysts, who believe the bill will be watered down, believe content regulation is best left to broadcasters.
"The bill gets bogged down in micro aspects of distribution and content, while missing the macro issues of convergence and digitisation from the consumer's perspective," Couto said.
