Tata Play

The Tata and Bharti groups are finalizing a merger between their direct-to-home (DTH) businesses, Tata Play and Airtel Digital TV, in a strategic move to consolidate their positions amid a shrinking pay-TV market. Merger Details and Ownership Structure The merger will be executed through a share swap, with Airtel expected to hold a majority stake of 52-55% in the combined entity, while Tata Play’s shareholders, including Walt Disney, will own 45-48%. This deal is set to enhance Airtel’s non-mobile revenues by reinforcing its ‘triple play’ strategy, which integrates telecom, broadband, and DTH services. Tata Play, formerly Tata Sky, was initially a joint venture with Rupert Murdoch’s News Corp, with Walt Disney acquiring News Corp’s stake in 2019 after purchasing 21st Century Fox. Airtel Digital TV, operated under Bharti Telemedia Ltd, is a wholly owned subsidiary of Bharti Airtel. Market Impact and Subscriber Base The merger will provide Airtel access to Tata Play’s 19 million subscriber homes, creating a combined entity with 35 million paid subscribers as of September 2024 and revenue exceeding ₹7,000 crore in FY24. Additionally, Tata Play’s broadband arm has 500,000 customers, offering cross-selling opportunities. Both companies are expected to sign a heads of terms agreement soon, after which due diligence will begin. The operations of both firms are valued at approximately ₹6,000-7,000 crore each. While Airtel’s senior management is likely to oversee the new entity, Tata is negotiating for two board seats. Industry Trends and Competitive Landscape This deal follows a decade after the Dish TV-Videocon d2h merger and aligns with broader industry shifts, such as Reliance Industries and Walt Disney merging Star India and Viacom18 to form JioStar. The pay-TV sector has contracted significantly, with subscriber numbers falling from 120 million to 84 million homes in recent years due to competition from OTT platforms and DD Free Dish’s free DTH service. A TRAI report from September 2024 indicates that pay DTH subscribers have declined to 60 million from 70 million in FY21. Analysts believe Airtel aims to convert Tata Play’s top 5 million DTH subscribers into broadband customers to boost average revenue per user (ARPU). Regulatory Challenges and Financial Liabilities The merger faces regulatory scrutiny, particularly due to pending licence fee disputes. Bharti Telemedia has a potential liability of ₹5,580 crore, with provisions of ₹3,426 crore made as of March 31, 2024. Tata Play also faces a consolidated licence fee demand of ₹3,628 crore, including ₹1,401.66 crore in interest. Future Outlook Despite the pay-TV sector’s decline, the merged entity is poised to become India’s largest pay-TV provider, leveraging bundled services and broadband integration to drive future growth. Source: Social Samosa