Market Insight

Reliance Communications exits Indian pay TV business via sale of Big TV

December 01, 2017

Constantinos Papavassilopoulos Constantinos Papavassilopoulos Principal Research Analyst, Service Providers & Platforms
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Reliance Communications Ltd, owner of Indian satellite pay TV operator Big TV, has entered into an agreement with two Indian enterprises for the sale of Big TV. The buyers are Veecom Media & Television, a broadcaster specializing in religious and spiritual channels, and Pantel Technologies, an information technology and communications device company.

Financial details were not disclosed, but IHS Markit understands thebuyers acquired 100% of the shares of Big TV on an “as-is, where-is” basis along with existing trade and contingent liabilities. Bank guarantees have been submitted to the Ministry of Information and Broadcasting (MIB) and the buyers have taken control of Reliance Communications ' satellite pay TV operator licence.   

Our Analysis

Reliance Communications’ decision to exit the satellite pay TV business has been rumoured for almost a year following the announcement of a mega-merger between competitors Dish TV and Videocon d2h.

IHS Markit believes that the key reasons for Reliance Communications'exit of the pay TV business is as follows:

  • Reliance Communications will re-focus its business and resources to their business-to-business (B2B) telecom services. Reliance Communications has the largest network of backhaul optical fibre amongst all private operators in India. Together with Reliance Jio, the company  also controls almost 44,000 telecom towers, which the two companies lease in part to other, smaller, operators.Furthermore, Reliance Communications is in talks with other telecom operators like Aircel for a possible merger. While the deal with Aircel has not gone through, it was announced in October 2017 that Reliance Communications will merge with Sistema Shyam Teleservices (a Russian-owned medium size telecom operator in India) and that all wireless business assets of Sistema will come under the control of Reliance Communications.
  • An increase in competition within the Indian satellite pay TV market, especially after the merger between Dish TV and Videocon d2h. The merged entity, Dish TV Videocon, will be the largest pay TV operator in India,with over 30 million subscribers by the end of 2018, according to IHS Markit. Separately, Tata Communications' decision to sell its mobile consumer business to Airtel (another major telecom operator in India) is just the preamble of a possible merger of the satellite pay TV business of the two telecom operators. If Tata Sky and Airtel merge, the newly formed company will create a pay TV operation with a subscribers base of around 25 million by the end of 2018. 
  • Unsustainably low levels of average revenue per user (ARPU). Monthly ARPUs for satellite operators in India range between just $3 and $4 in 2017. As such, India's satellite pay TV operators have focused on offering value-added services (like HD channels, PVRs, multi-room and TV Anywhere services). As a result, the ability of smaller operators like Big TV, to compete with the major players for the provision of value-added services can cause a serious drain on financial resources and revenues.
  • Proliferation of online subscription video services in India. Global video giants like Netflix and Amazon Prime Video already operate  in India along, with regional services like Hooq, Viu and Spuul. However, IHS Markit believes online streaming services do not yet pose a real threat to India's pay TV business due to the poor state of broadband infrastructure, both in fixed and mobile networks (which are still insufficient in supporting mass trafic of online video for a large mass of subscribers), a lack of payment solutions (the majority of people in India still do not own a bank account) and the high levels of piracy in the country. IHS Markit forecasts the size of India's paid-for online video market will remain small in 2017, with 5.3 million paying subscribers generating 6.4 billion rupees ($ 95.8 million) of customer revenue.

 

Geography
India
Research by Market
Media & Advertising
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