Billionaire John Malone’s Liberty Media is in talks with Bharti Airtel to take a stake in its DTH satellite business. According to the Economic Times, Liberty is seeking a 25 percent in the unit.
Bharti has been trying to unload the satellite business, which has an 18 percent market share that it’s growing thanks to a government mandate for cable to move to digital TV. According to the Economic Times, Bharti is looking for the unit to be valued at about $1.5 billion, which has been an obstacle in finding a buyer for a larger stake. That’s forced it to turn to other, more strategic options.
The satellite outlook in the country is a bit of a mixed bag: the government’s digitization initiative has driven Indian DTH market to double-digit growth mode, with the subscriber base expected to grow to 76.6 million by 2020. Together, DISH TV, Tata Sky, Videocon and Bharti command 88 percent market share, leaving plenty of room to take more from cable.
“DTH operators are expected to treble to over $5 billion by 2020 from $1.5 billion now as mandatory cable TV digitization would help DTH players expand their subscriber base,” said Media Partners Asia, a Singapore-based pay TV research firm, in an April report.
But along with the growth, subscriber acquisition costs and churn rates have gone up. “The DTH industry is in severe need of funds and investments from both financial and strategic investors. The industry, which is already reeling under multiple taxation, shortage of transponder capacity and subsidizing set-top boxes, this deal will significantly help in the sustenance of the business,” Smita Jha, leader-entertainment & media practice at global consultant Pricewater Coopers, said.
For its part, Liberty has been on a buying spree of late—just days after closing its $25 billion takeover of U.K. cable giant Virgin Media, last month it agreed to pony up $2.62 billion to buy a 27.3 percent stake in Charter Communications, the U.S. MSO that serves five million customers in 25 states. In the Charter case, Malone, “the king of cable, may be using a tactic he has employed before: taking a minority stake in a company and building a controlling interest,” Macquarie analyst Amy Yong told Reuters. “He used a similar strategy with Sirius XM.” She added, Malone “is probably going to have a pretty big say in the company’s future over the next few years. This will accelerate capital returns and take advantage of Charter’s tax assets to consolidate the cable industry some more.”
It’s likely that Liberty will employ a similar tactic with Bharti.
The company also has a minority stake in Time Warner and Viacom, and interests in more than a dozen others, including CenturyLink, Live Nation and Barnes & Noble.
This article by Michelle Clancy and can be seen here.
