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R-Digital close to selling 80% stake to Sun TV

For Rs 2,500 crore; agreement being prepared, to be signed within days

Surajeet Das Gupta & T E Narasimhan  |  New Delhi/ Chennai 

Reliance Digital TV, the fully-owned subsidiary of Reliance Communications that runs its direct-to-home (DTH) operations, is close to selling over 80 per cent stake to Sun TV, controlled by Kalanithi Maran, in a deal valued at around Rs 2,500 crore.

Under the agreement, which is being prepared to be signed within a few days, Reliance will get a one-time cash payment in return for infrastructure and assets of Reliance DTH, while Sun TV will get full management control over the company. The due diligence for the deal has already been completed.

When contacted, an RCom spokesperson declined to comment on the issue. Sun Group Chief Financial Officer S L Narayanan said: “We have also heard these from time to time; we choose not to comment, as much of what is being reported could well be unsubstantiated and misleading.”

Analysts say, this could be part of RCom’s restructuring exercise aimed at getting out of all its non-core businesses; the cash it gets from the deal could be used to to service debt. The company is also expected to sell a majority stake in Reliance Globalcomm, which controls its submarine cable assets, worth Rs 6,000-7,000 crore.

RCom had debt of Rs 38,864 crore till it pre-paid, only a few days earlier, two external commercial borrowings of $500 million each. It has also undertaken long-term agreements with Mukesh Ambani-controlled Reliance Jio Infocomm for use of its tower infrastructure. Under these, RCom will get a rental income of Rs 12,000 crore over a period.

As on March 31, Reliance DTH had 4.6 million customers and ran 260 channels on high-density format. Sun TV, on the other hand, has a subscriber base of about 8.5 million. After the deal, the combined entity, with a subscriber base of 13.1 million, will be a force to reckon with.

The largest player in this space at present is Dish TV, which had a net subscriber base of 10.7 million as of March 2013. The other key players include Tata Sky, Airtel (8.1 million subscribers) and Videocon D2H.

The country’s total DTH subscriber base rose from around 28.7 million in December 2011 to 32.4 million as at the end of December 2012, according to analyst reports.

Sun Direct, an 80:20 joint venture between the Maran family and Malaysia’s Astro Group, specialises in catering to the regional taste through the MPEG-4 technology. After its launch in Tamil Nadu in December 2007, Sun initially expanded in other southern states and achieved the one-million subscriber mark in less than 200 days. The company then rolled out its pan-Indian operations in September 2008.

Among other DTH players that have sold stake in recent past, mainly to private equity funds, is Tata Sky. It sold a five per cent stake to India Opportuntities Fund for $49.9 million. There also was a buzz that Airtel DTH was in talks with major PE funds like KKR and Bain Capital to sell a minority stake. Besides, there were reports that Apollo Global Management could sell its 11 per cent stake in Dish TV.

Dynamics of the deal
Buyer: Sun TV
Seller: Reliance Digital TV
To be sold: 80% stake
Estimated deal size: 2,500 crore
Combined subscriber base*: 13.1 mn
Reliance Digital: 4.6 million
Sun TV: 8.5 million
*Subscriber base as on March 31, 2013

Other major DTH players:
Dish TV, Tata Sky, Airtel Digital, Videocon D2H

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First Published: Wed, July 03 2013. 00:50 IST