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Core Member
Uday Shankar is a tough man when it comes to dealing with joint venture partners: he is not averse to exiting from old relationships if he sees the growth engines being exhausted.
In his eight-year tenure as CEO, Star India has parted ways with three of them: Balaji Telefilms, Hathway Cable & Datacom and MCCS, the JV company with ABP Group for the TV news business. At a much broader level, parent News Corp also ended the Asian sports broadcasting joint venture with Walt Disney and took full control of ESPN Star Sports.
Still, Shankar is fair, ethical and a trusted friend. Star has made none of the promoters of the JV partners uncomfortable by selling the shares to anybody hostile. The only joint venture left is Tata Sky, the DTH company in which Tata Sons has 60 per cent stake and Temasek holds 10 per cent. And, of course, Shankar’s grand alliance with Zee Group to handle the distribution business through an entity named MediaPro Enterprises.
In Asianet Communications Ltd, which was acquired by Star, Shankar has former telecom czar Rajeev Chandrasekhar as a minority partner. Star has agreed with its partner to list Asianet and give Chandrasekhar an exit option.
Excerpts:
Q. The government has recently lifted the cap on foreign direct investment (FDI) to 74 per cent in broadcast-carriage services sector like DTH and cable. So will we see News Corp taking majority control of Tata Sky?
In the shareholder agreement with Tata Sons, we have an option to become an equal joint venture partner in Tata Sky. But there is a cross-media regulation in India (broadcasting company can't own more than 20 per cent stake in a DTH or cable venture). So we are handicapped by that.
Q. Won't low DTH ARPUs (average revenue per user) be a deterrent for investors?
I don't take that as a serious handicap. There have been a few reckless players who have spoilt the DTH market. But sanity is returning. Besides, there have been a few serious drives in recent quarters to lift ARPUs up. HD services is also another route to improve ARPUs. The industry's most serious problem is very high taxation. Investors will look at policy corrections that would help the sector turn healthy.
Q. Now with digitisation being mandated, will you re-enter cable TV distribution business as it offers a huge value proposition?
We exited cable when we sold our entire stake in Hathway Cable & Datacom (the final 17.3% it sold to private equity firm Providence and Macquarie Bank for Rs 3.58 billion). It is a great cable company but in the distribution side of the business, we decided to place our bets on DTH. We will not re-enter cable; nobody has the management bandwidth to participate directly in every piece of the business. The market is big and there is a huge opportunity for DTH.
Q. Is Star looking at buying a stake in NDTV, after exiting from the TV news joint venture company MCCS?
We decided to exit the TV news business in India because of the 26 per cent FDI cap in the sector. MCCS (which ran three news channels including Star News in Hindi, Star Ananda in Bengali and Star Majha in Marathi) had become operationally profitable. So our problem was at a more strategic level. We have decided not to invest in any news venture including NDTV till this ceiling is lifted.
We feel that the whole economics of the TV news business in India is not working. In any case, News Corp is not a financial investor. If you are not in the driver's seat or have no significant say in the business, it doesn't make strategic sense at all.
Q. Is Vijay TV and Kannada GEC Suvarna also a part of Asianet Communications?
Yes, the entity has these south Indian-language channels.
Q. Zee is currently distributing its sports channels independently and so is ESPN Star Sports. Since News Corp is going to completely own ESS, will we see a consolidation in the sports bouquet under MediaPro?
It's difficult to say anything right now. We are still waiting for the approval and the acquisition of the company (ESS) to go through. There is MediaPro as far as we are concerned. It is up to both the partners to see if we want to increase the scope of our relationship and partnership or do we want to limit it to what we already have.
Read Complete Interview : Here
In his eight-year tenure as CEO, Star India has parted ways with three of them: Balaji Telefilms, Hathway Cable & Datacom and MCCS, the JV company with ABP Group for the TV news business. At a much broader level, parent News Corp also ended the Asian sports broadcasting joint venture with Walt Disney and took full control of ESPN Star Sports.
Still, Shankar is fair, ethical and a trusted friend. Star has made none of the promoters of the JV partners uncomfortable by selling the shares to anybody hostile. The only joint venture left is Tata Sky, the DTH company in which Tata Sons has 60 per cent stake and Temasek holds 10 per cent. And, of course, Shankar’s grand alliance with Zee Group to handle the distribution business through an entity named MediaPro Enterprises.
In Asianet Communications Ltd, which was acquired by Star, Shankar has former telecom czar Rajeev Chandrasekhar as a minority partner. Star has agreed with its partner to list Asianet and give Chandrasekhar an exit option.
Excerpts:
Q. The government has recently lifted the cap on foreign direct investment (FDI) to 74 per cent in broadcast-carriage services sector like DTH and cable. So will we see News Corp taking majority control of Tata Sky?
In the shareholder agreement with Tata Sons, we have an option to become an equal joint venture partner in Tata Sky. But there is a cross-media regulation in India (broadcasting company can't own more than 20 per cent stake in a DTH or cable venture). So we are handicapped by that.
Q. Won't low DTH ARPUs (average revenue per user) be a deterrent for investors?
I don't take that as a serious handicap. There have been a few reckless players who have spoilt the DTH market. But sanity is returning. Besides, there have been a few serious drives in recent quarters to lift ARPUs up. HD services is also another route to improve ARPUs. The industry's most serious problem is very high taxation. Investors will look at policy corrections that would help the sector turn healthy.
Q. Now with digitisation being mandated, will you re-enter cable TV distribution business as it offers a huge value proposition?
We exited cable when we sold our entire stake in Hathway Cable & Datacom (the final 17.3% it sold to private equity firm Providence and Macquarie Bank for Rs 3.58 billion). It is a great cable company but in the distribution side of the business, we decided to place our bets on DTH. We will not re-enter cable; nobody has the management bandwidth to participate directly in every piece of the business. The market is big and there is a huge opportunity for DTH.
Q. Is Star looking at buying a stake in NDTV, after exiting from the TV news joint venture company MCCS?
We decided to exit the TV news business in India because of the 26 per cent FDI cap in the sector. MCCS (which ran three news channels including Star News in Hindi, Star Ananda in Bengali and Star Majha in Marathi) had become operationally profitable. So our problem was at a more strategic level. We have decided not to invest in any news venture including NDTV till this ceiling is lifted.
We feel that the whole economics of the TV news business in India is not working. In any case, News Corp is not a financial investor. If you are not in the driver's seat or have no significant say in the business, it doesn't make strategic sense at all.
Q. Is Vijay TV and Kannada GEC Suvarna also a part of Asianet Communications?
Yes, the entity has these south Indian-language channels.
Q. Zee is currently distributing its sports channels independently and so is ESPN Star Sports. Since News Corp is going to completely own ESS, will we see a consolidation in the sports bouquet under MediaPro?
It's difficult to say anything right now. We are still waiting for the approval and the acquisition of the company (ESS) to go through. There is MediaPro as far as we are concerned. It is up to both the partners to see if we want to increase the scope of our relationship and partnership or do we want to limit it to what we already have.
Read Complete Interview : Here