Tata Group and Bharti Group are finalizing a merger of their direct-to-home (DTH) services, Tata Play and Airtel Digital TV, to counter financial losses as viewers turn to digital streaming.
ET Telecom reported this deal involves a share swap, with Airtel poised to hold over 50% of the new entity. This reflects a wider shift in India, where consumers are moving from traditional TV to online platforms.
Background and Ownership Insights
The merger talks first appeared in an ET Telecom report on October 8, 2024. Tata Play, originally Tata Sky, began as a joint venture with News Corp, whose stake The Walt Disney Company acquired in 2019.
Airtel will access Tata Play’s 19 million households, supporting its plan to combine telecom, broadband, and DTH offerings. In April 2024, Tata Sons raised its Tata Play stake to 70%, buying Temasek’s 10% share for Rs. 835 crore ($100 million), setting the company’s value at $1 billion—down from $3 billion pre-pandemic.
Key Merger Details
- Ownership: Airtel will own 52-55%, with Tata Play shareholders, including Disney, holding 45-48%.
- Valuation: Both entities are valued between Rs. 6,000 crore and Rs. 7,000 crore.
- Leadership: Airtel’s senior team will run the company, though Tata requests two board seats.
- Subscribers: The combined base reached 35 million paid users by September 2024.
- Revenue: FY24 revenue surpassed Rs. 7,000 crore, with Tata Play adding 500,000 broadband subscribers.
A non-binding agreement is expected shortly, followed by due diligence. An executive said, “This has been a prolonged issue for Tata, and partnering with a familiar group aims to resolve it swiftly.” Airtel Digital TV falls under Bharti Telemedia Ltd, a fully owned Bharti Airtel subsidiary. Disney will keep its shares, as no cash buyout is planned.
Industry Trends and Challenges
This merger is the second major DTH consolidation in a decade, after the 2016 Dish TV-Videocon d2h deal. It occurs alongside Reliance and Disney’s JioStar, a Rs. 26,000 crore media entity. The pay-TV market has shrunk from 120 million to 84 million homes, driven by free services like DD Free Dish and streaming platforms.
A TRAI report noted DTH subscribers dropped from 70 million in FY21 to 60 million by September 2024. Analysts see consolidation as inevitable, with free Hindi channels on DD Free Dish hastening the decline. JioStar’s paywalled sports content might offer some support to pay-TV.
Strategic Aims and Financial Hurdles
Airtel plans to shift Tata Play’s top 5 million DTH users to broadband, aiming for higher revenue per user. A DTH expert stated, “Airtel will lead the pay-TV market, blending telecom, broadband, and DTH services.” Regulatory issues remain, however.
Bharti Telemedia faces Rs. 5,580 crore in disputed license fees for FY23 and FY24, with Rs. 3,426 crore reserved as of March 31, 2024, though no payout is imminent. Tata Play has a Rs. 3,628 crore demand, including Rs. 1,401.66 crore in interest. An industry veteran said, “From AGR dues to GST, these liabilities complicate exits.”
Changing Market Landscape
DTH providers now blend OTT platforms with TV channels to retain users, but telecom firms like Airtel may dominate due to their scale. Disney, after merging its Indian media with Jio, will stay a stakeholder. With IPO plans dropped and losses mounting, Tata Play’s valuation has fallen, making this merger a practical step.