Update: How national MSOs can plan their size as TRAI aims to cut cable monopolies
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12-12-2013, 08:56 AM
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How national MSOs can plan their size as TRAI aims to cut cable monopolies
MUMBAI: The national multi-system operators (MSOs) will not need to make epic changes in their business strategies if the broadcast sector regulator’s recommendations to cut cable monopolies become law after getting the nod of the Information and Broadcasting Ministry (MIB). The Telecom Regulatory Authority of India (TRAI) has provided enough space for the multi-entity MSOs to grow by defining the state as a market for determining monopolistic share.
The cap of 50 per cent share in the cable TV market is also too large a compound for any MSO to realistically have and control. In no geography will the national MSOs have to break their leg to bring down their market share. Uttar Pradesh and Andhra Pradesh are the two states where Den Networks and Hathway Cable & Datacom have dominant shares in the cable TV market, but it is well below the 50 per cent cap. In Gujarat, joint venture partner GTPL will have to possibly restructure (State-level MSOs with dominant market share need not bother about haircuts), but Hathway can remain idle as its presence in the state is only through its equity in the regional MSO. vd-wadhwa-siti-cable“No national MSO will invest exorbitantly so that it can live as a monopoly in a state. There is a huge amount of capital required to digitise in Phases 3 and 4. This is not a cup for only the top 3–4 players. More players are needed,” says Siti Cable Network chief executive officer VD Vadhwa. The national MSOs will, however, have to rework some of their plans. Circling to acquire cable networks where they have close to 50 per cent market share in the state will no more be part of the strategy. They will rather look at spreading out to newer areas than concentrating on becoming a formidable player in a particular state so that it does not conflict with the regulation. “In Kolkata, where we have around 45 per cent share, there is no need to do acquisitions. Being a market leader, we will have scope to grow organically. In any case, West Bengal is a large territory and we are nowhere near 50 per cent of the cable TV market in that state. Our strategy will rather be to acquire networks in markets where we are comparatively weak such as Mumbai and Bengaluru so that we can grow our share,” says Wadhwa. Jadish KumarHathway Cable & Datacom chief executive officer Jagdish Kumar agrees that spreading out would be a good business model to follow. “In Andhra Pradesh, there may be obstacles to acquisitions as we are a big player there. But we are not close to 50 per cent market share in that state. In any case, 50 per cent is too large a market share to have. It is better to have at least 3–4 players in a market as healthy competition will mean implementing the best practices. It is wrong to assume that in a market where there is a dominant player, the service qualities will be better. Even a local MSO with a 5 per cent share can spoil the market and make it difficult for collecting bills or offering better quality services at a fair price,” Kumar says. Mohammad Ghulam AzharDEN Networks chief operating officer MG Azhar believes that there will be no requirement in the digitisation era to acquire cable networks and still the market will consolidate. “The landscape will clean up as many small operators will not be able to fund digitisation and will source the infrastructure from the bigger national MSOs. There will be ample scope for organic growth for the national MSOs and the small operators will function more as distributors,” he says. There is another road open to the national MSOs. They can open their wallets to acquire their subsidiaries or joint venture partners in states where they want to be in excess of 50 per cent market share. They also have the option of restructuring their holdings in these JVs to below 26 per cent, but this would not be something they would want to exercise. “We could be encouraged to buy out our joint venture partners or merge them into our parent. This will mean that we become a single entity MSO in these markets,” says Kumar. No national MSO will be encouraged to make a dash for acquiring dominant state-level MSOs such as Ortel. This will mean that the single-entity state MSO will fall under the ‘multi-entity’ criteria and will have to shave excess market share within 12 months. “This may not practically impact anybody as we do not see any potential acquisitions of this nature on the horizon. Fastway and state-owned Arasu will not raise equity capital. Asianet is owned by the Hathway promoters and will not look at marrying another MSO. For Ortel and Asianet, the fund-tapping exercise could be either private equity or an initial public offering (IPO),” says a media analyst. Ortel, in fact, already has 34 per cent of its stake residing with New Silk route and has applied for an IPO. TRAI is certain about one place where the MSOs need to hit the brake. Big MSOs such as Hathway, DEN, Siti Cable and IndusInd Media & Communcations Ltd (IMCL) need to cage their desire to consolidate among themselves. Even consolidation of two MSOs in a state which will give the combined entity a market share of over 50 per cent can be ruled out. “Big-ticket acquisitions cannot happen. But in any case that would have fallen under the purview of the Competition Commission of India,” says Azhar. Read more at: http://www.televisionpost.com/cable/how-...onopolies/ | TelevisionPost.com |
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