Dish TV-Bharti Airtel deal called off due to differences over valuation

The deal between Subhash Chandra’s Essel group, the promoters of direct-to-home (DTH)) company Dish TV, and Sunil Mittal’s Bharti Airtel has been called off due to differences over valuation. The promoters are now in talks with a global financial investor, which has no operations in the country, to pick up half their stake.

The cash generated from such a sale will be used as part of the plan by the Essel group to buy back 5 per cent in flagship company Zee Entertainment Enterprises (ZEEL) in the next 12 months. According to sources close to the discussions, it expects to get around Rs 2,000 crore from the deal. The talks with Bharti Airtel were over the latter buying the promoters’ stake.

The first offer to buy the Zee shares will be given to the existing financial investors, which include Oppenheimer with a 19.86 per cent stake, as well as GIC, which has around 10 per cent, besides others. With this, the promoters, who are currently in a minority, will be able to increase their stake from the current 5 per cent.

The game plan is eventually to go up to 26 per cent, say top sources close to the Essel group though a group spokesman declined to comment on the issue.

The promoters of ZEEL are also in talks with a US-based strategic investor to pick up a 26 per cent stake in the company. Sources say the potential investor is willing to allow the promoters to manage the company as part of the tentative discussions for a deal.

chart

With operating revenues of Rs 6,166.1 crore, Dish TV has a market capitalisation of Rs 2,046 crore. It has a subscriber base of 23.94 million, putting it neck-and-neck with Tata Sky, which is just a whisker ahead. But Dish TV’s subscriber base is far ahead of Bharti Airtel’s 23.39 per cent share of the 69 million subscribers in the DTH market.

Bharti Airtel has been looking at expanding its DTH operations in order to take on Reliance Jio’s aggressive strategy to reach homes through fibre-to-the-home and bring in high speed broadband. Had it worked out, the acquisition of Dish TV would have catapulted Bharti Airtel into the position of the largest player in the DTH market with a market share of over 54.62 per cent, overtaking Tata Sky.

Bharti Airtel has followed a dual strategy. Apart from DTH services, it is also the second largest player in fibre-to-the-home with 2.2 million broadband users. This puts it behind BSNL but far ahead of Reliance Jio which has over one million users.

However, last year Reliance Jio bought Hathway and Den Cable which both have fixed broadband customers. The Essel group has been gripped by serious financial crises due to its foray into infrastructure projects for which it took loans by pledging ZEEL shares. It has been trying to improve its finances.

Currently, it has to pay back loans of around Rs 2,500 crore which it hopes to finance through the sale of 14 road projects. If it fails to sell some of these assets, it will, as a last resort, go to the IBC for redress. The Dish TV deal is important for Essel because it will generate the cash it needs to buy back part of the shares in ZEEL.

Dish TV India zooms 15% after clarification on CARE ratings downgrade

Shares of Dish TV India surged 15 per cent to Rs 14.44 on the BSE on Monday after the company said the default in debt repayment was on account of a temporary cash shortfall due to peak payment commitments to suppliers.

“The Company’s deferral to service the loan amount is due to bunching of repayment obligations and utilization of funds for other business requirements including, both capital expenditure and payment of operating liabilities to broadcasters and suppliers,” Dish TV India said in a regulatory filing. READ MORE

The company issued the statement after rating agency Care Ratings downgraded the rating of the company's short-term bank facilities to ‘CARE D’ from ‘CARE A4+’

“The revision in the rating assigned to the bank facilities of Dish TV India takes into account default in payment of short term loan due on November 28, 2019,” Care Ratings said in a press release on November 22.

“The financial profile stands weak on account of stretched liquidity position due to sizeable debt repayments in the near term and the company would continue to remain in the investment mode. In addition, impairment on goodwill as on March 31, 2019 has resulted in decline in reported net-worth”, it said.

However, Dish TV India, on Friday after market hours, said it has been drawing on its internal cash accruals to fund its capital expenditure for more than six quarters now.

Debt and interest payment obligations falling due after the particular incident of non-service have also been fulfilled on time.

While being cautious about its cash expenditures, the company also remains optimistic about improvement in its liquidity situation going forward, it said.

The Company is in touch with its banking partners and hopes to get alternate credit facilities to finance its regular capex so as to normalize the utilization of its cash flow towards debt repayment, it added.

Meanwhile, on Friday, the stock of Dish TV India had tanked 15 per cent to Rs 12.56 on the BSE after the company informed the exchanges that a lender had invoked 3.12 million pledged shares.

“On December 4, 2019, IDBI Trusteeship Services invoked 3.12 million equity shares representing 0.17 per cent of promoter holding pledge for collateral of loan,” the company said in a regulatory filing.

In the past two weeks, the stock has underperformed the market by falling 33 per cent, as compared to 1 per cent decline in the S&P BSE Sensex till Friday.

At 10:33 am, Dish TV India was up 9 per cent at Rs 13.66 on the BSE, as compared to 0.02 per cent decline in the benchmark index. A combined 55 million shares have changed hands on the counter on the NSE and BSE so far.

Dish TV stock falls over 12% as promoters reduce their stake in Q2

Shares of Dish TV, part of the Essel group, fell over 12 per cent on Tuesday after the promoters reduced their stake in the quarter ended September 30, 2019 (Q2).

The latest shareholding pattern, disclosed on Tuesday, shows that the stake of the promoter and promoter group fell to 55.27 percent at the end of Q2, against 57.52 percent held at the end of the April-June (Q1) period.

The promoters, who've been grappling with debt issues, have been cutting their stake in the company since the December 2018 quarter, when their sharehold

Dish TV sets target to get 20% of subscribers to online streaming services

Even as over-the-top (OTT) platforms are gaining momentum in the entertainment space, Dish TV, which has been banking on revenues from direct-to-home (DTH) transmission, is now focussing on upgrading 20 per cent of its customers to online streaming services in the next 18-24 months.

This year itself, the company has set a target to upgrade atleast 500,000 viewers to online streaming services and is coming up with connected set-top boxes which can stream digital content directly to the television (TV) irrespective of the TV’s functional capabilities.

“Connected set-top boxes will offer the customer to even view digital content on a CRT (Cathode Ray Tube) TV. We will be launching it in the next few weeks and it will play a crucial role to help us convert customers to digital streaming”, Sukhpreet Singh, corporate head of marketing at Dish TV India said.

It is estimated that in the country, out of 197 million homes who have TV sets, around 66 per cent own a CRT TV.

On the other hand, it has already launched streaming services stick which, once connected to the modern TVs, can stream digital content.

“We have also come up with an app where we are providing exclusive content.

Even user generated content is featured there”, he said.

The company has a customer base of 23.9 million and had added around two lakh new customers in the first quarter of the current fiscal year. This year, it has targeted a net addition of 700,000 new customers and is banking on its digital services and competitive pricing to achieve the target.

Out of its total customers, around 35 per cent spends over Rs. 400 per month to recharge their subscription packs and the rest spends less than this amount. Singh said this 35 per cent is Dish TV’s premium customer base and they are the primary targets for the upgradation plan.

While independent exclusive shows and content, without any commercial breaks, have gained popularity in the country, which has led to the emergence of various local OTT platforms like ALT Digital Media Entertainment, Hoichoi and several others, apart from the biggies like Netflix or Amazon Prime, Dish TV’s average revenue per user, has stagnated to Rs. 116 per month despite a surge in its customer base.

In the country, from a base of 528 million in 2018, digital subscription is expected to shoot up to 1.10 billion in 2030 and it is estimated that streaming sales in India will triple to more than Rs 621 billion by 2024.

Singh said in face of competition not only from peers and streaming platforms, apart from the upgradation plan, Dish TV will also be focussing on aggressive pricing for the lower end of viewers.

Asked if the targets are achievable in the backdrop of the slowdown, Singh said, “We have added new customers despite the slowdown and we haven’t seen customers downgrade their subscription packs”.

Dish TV has a total subscription base of 23.9 million

35% of total users have subscribed to packs over Rs. 400 per month

Dish TV intends to convert 20% of total customers to online streaming services

Dish TV is coming up with connected set-top boxes

It already has TV streaming sticks and app