|Should Airtel be worried?|
|Thursday, 05 January 2012 00:00|
Network18 deal is just one part of RIL's 4G foray
A couple of years ago, when Bharti-Airtel CEO Sanjay Kapoor was asked whether he was worried about Anil Ambani’s foray into films (with Spielberg, for instance), his answer was that Bharti-Airtel preferred to be a marketer of content—so his entertainment team would buy the best content (a Don 2 video-game, for instance) instead of being weighed down with creating it or being forced to hock a group firm’s content. Things look different today with RIL’s impending 4G foray, powered by a tablet-type device pre-packed with loads of entertainment content, and which may or may not double up as a phone—the company has twice the 3G spectrum Bharti Airtel or Vodafone has and at 40% of the cost, and has now stitched up a formidable media network with its Network18 deal. But matching Bharti-Airtel’s or Vodafone’s large subscriber base poses its own challenge, so the stickiness of the RIL product is critical.
Apart from leading business channel CNBC-TV18, Raghav Bahl’s group owns 50% of Viacom18 which runs channels like Colors/Nickelodeon/MTV, movie production house Viacom18 Motion Pictures and a home shopping portal. As part of the R4,000 crore deal, RIL has sold its Eenadu group holdings to Network18—so the 4G foray will have access to both Eenadu’s Telugu and non-Telugu news and general entertainment channels as well as those of Network18, around 25 in total. In a complex deal, RIL will fund Network18 promoter Raghav Bahl’s rights issues, the funds from which will be used to buy RIL’s Eenadu holdings. At the end, RIL will have close to a 30% beneficial interest in Network18 group.
Whether the deal is profitable for RIL is not yet clear—Oswal Green Tech bought its 14.2% stake in NDTV for just R24 crore, though the market cap of NDTV is around a tenth of Network18 and TV18 combined. But for both, it is a force-multiplier—a Mukesh-Anil business relationship will reinforce this since RIL’s 4G data subscribers will get access to RCom’s phone network as well as to the Anil group’s media empire. How regulations pan out will also be crucial. So far, mandatory TV content sale to all players is the rule—so if a Star gets a new Balaji show, this has to be made available to not just TataSky but also to Airtel DTH. If this is extended to the telecom space, as is likely with convergence becoming a reality, a Colors show available on a RIL 4G tablet may also have to be given to a Bharti-Airtel. If exclusive content is to be allowed, as industry has been demanding, the nature of competition will change dramatically in the rapidly corporatised R17,000 crore media-entertainment industry that’s growing at 13% annually. From the regulatory point of view, given the sharp convergence in telecom and television, Trai needs considerable beefing up to ensure competitive space for all players. For the media, along with the issue of paid news, another issue of ensuring independence of the news process has come up.