Dinodia Capital Advisors

October 2012

Broadcasting Industry: Switching the Channel to FDI

1

Executive Summary

In its onslaught of big reforms in the country, the UPA-II government has recently passed

the decision to raise the Foreign Direct Investment (FDI) ceiling to 74% from 49% in the

Broadcasting Sector in India to improve the accessibility of broadcasting services and

increase adaptation of international best practices

The current reforms will help the industry in terms of attracting more players in the cable

networks sector and will also facilitate the process of convergence in communication and

entertainment technologies

As per government regulations, the broadcasting industry needs to be digitalized by

December 2014 for which the industry would need a capital expenditure of ~Rs 20,000-

25,000 crores and by easing the FDI norms the government expects huge capital inflows in

the industry and possible consolidation of players as well

The overall liberalization in broadcasting services will not only bring in new investments to

India but will also build the information highways essential for the Indian economy to grow.

Additionally, the foreign players will bring in world-class technology, expertise and ideas that

will fuel new opportunities in the sector such as Digital Video Recording (DVR), High

Definition (HD) for the masses, bundling of Internet, Phone & Cable (Triple Play) etc.

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Overview of the Broadcasting Sector in India

The Indian Broadcasting sector is the largest in

Asia and is estimated to be Rs 38,500 crores in

2011-12 and is projected to grow at a CAGR of

12% to reach Rs 54,720 crores by 2014-15

Major investments are anticipated to come into the

sector given the governments directive of

digitization of broadcasting services by December

2014

India has more than 500 channels of different

genres viz. entertainment, movies, news & current

affairs, sports, music, religious today

Channels in different languages are also available

to cater to the requirements of regional viewers viz.

Tamil, Telugu, Marathi, Punjabi, etc

In the radio segments besides All India Radio

(AIR), city specific licenses have been given for FM

Radio channels e.g. Red FM, Radio Mirchi, Big FM,

Radio City etc

40%

38%

5%

8%2%4%

3%

1%

Mass Entertainment Regional Channels News Channels

Hindi Film Chanels English Entertainment Sports Channels

International Kids Music Channels

Genre wise Viewership Share

3

Structure of TV Broadcasting Industry

India is estimated to have 106mm households with cable and satellite TV today. Some

26mm use DTH and 80mm receive feed from cable networks

4

What is Changing ?Government Policies

Activity Examples Existing% of FDI

ExistingRoute

Amended % of FDI

Amended Route

Cable Networks Local mom and pop cable providers

49% Government No Change Automatic

Direct-to-Home

Dish TV 49% Government 74%Automatic route upto 49% ;Government route beyond 49% and upto 74%

Setting up of Up linking HUB /Teleports Tata Sky 49% Government 74%

Automatic route upto 49% ;Government route beyond 49% and upto 74%

Up-linking a News & Current Affairs TV Channel ABP News 26% Government No Change No Change

Mobile TV

Airtel, Vodafone

Notspecified in

existing policy

Not Specified in existing

policy74%

Automatic route upto 49% ;Government route beyond 49% and upto 74%

5

Porters Five Forces Analysis

Threatof Substitutes - Medium

A significant increase in the

popularity of other

entertainment mediums

A rise of downloading programs

through the internet, both

legally and illegally ( iPad

obsessed generation )

Bargaining

power of Suppliers - Medium

Rivalry

among competitors - High

Tremendous rivalry between players

broadcasting shows and events of

similar genres

Rivalry is also strong between

broadcasters to purchase the

broadcasting rights for the most

popular programs and events

Bargaining

power of consumers - Medium

Sensitive to the increasing

concentration and dominance of

cable and satellite program

distributors

Distributors are demanding higher-

quality program productions in the

HD digital format, to satisfy

subscribers' unique interests

Threatof new entrants - High

Big players are able to maintain high

levels of capital expenditure in

purchasing rights of the most

popular content

Difficult for new entrants to secure

the rights to popular programs

Broadcasting

Industry :

Moderately

Attractive Production companies form a

major supplier and have clout

over broadcasters

Typically depends upon the

quality of content

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Opportunities in new wave of Digitization

The Indian government mandated digitization of cable TV in India on 11th November

2011, which will affect more than 88 million households, and forever change the way

revenue is split across the Pay-TV value chain

Given that the entire set up is going to get changed for

the new digitization plan to be implemented an adequate

supply of well priced and upgraded technology will be

required and new players which can provide such

technology will have a good chance to tap into the

market

With the new FDI policies, fresh investments can be

made by foreign players, which will eventually help in

implementing global standards across India

Increasing number of TV households (as the middle class in India grows rapidly in size )

will result in more DTH subscribers in the future years, especially as the cost of DTH

systems will reduce because of technology advancements

Foreign players with industry expertise and deep pockets now have the ability to capture

huge market share quickly as mom-pop cable providers are replaced by modern

technology and DTH / Satellite broadcasting

ABCD = Astrology, Bollywood, Cricket & Devotion all attract huge audiences in

IndiaNew-age broadcasting and digitization will bring these to millions of Indians

from the comfort of their homes, 24/7 in High Definition soonit remains to be seen

who will be the early risers to grab this opportunity

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Dinodia Capital Advisors

Dinodia Capital Advisors

Corporate Profile

Dinodia Capital Advisors is a Financial Consulting firm

based in New Delhi, India. It assists clients across all

industries grow, both organically and inorganically. The

firm helps clients Raise Capital. Execute Merger &

Acquisition opportunities. Restructure, Transform and

Turnaround businesses. Resolve challenging problems.

Take advantage of financial and strategic opportunities.

Balance investor expectations. DELIVER VALUE

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Dinodia Capital Advisors Service Offerings

Dinodia Capital Advisors Advice Clients on :

Mergers and AcquisitionWe help in conducting a robust scan

of the market and selecting the most

suitable buyer or seller

Capital RaisingWe advice clients on their capital

needs and find them the right

partner who brings more than just

capital

RestructuringWe advise on business

restructurings to help achieve

financial, strategic and operational

efficiency

India Entry StrategyWe help set up and incubate

businesses in India, acting as a

trusted advisors to facilitate the

India entry strategy

Organizational

TransformationWe work with companies to put

systems, processes and

people in place to help take

advantage of both organic and

inorganic synergies

TurnaroundsWe work closely with companies to

help devise and implement a

turnaround strategy by plugging the

deficiencies of

management, technology, capital or

partnerships

Dinodia Capital Advisors Private Limited C-37, Connaught Place , New-Delhi 110001, Website - www.dinodiacapital.com

Tel No: +91 11 2341 7692, 2341 5272, Fax No: +91 11 4151 3666

Email: dinodiacapital@dinodiacapital.com

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