After FDI relaxation, industry is more positive about digitisation

Digitisation has been one of the most used words in the Indian broadcast and broadcast services industry for about a year and a half. There have been long debates on how it will help the industry, the government and the various stakeholders at various points in time, as and when the ministry takes a step towards or away from the digitisation process.

Now, in a new move, the government has increased the FDI cap from 49 per cent to 74 per cent in direct-to-home (DTH) and multi-system operators (MSOs). However, the FDI limit for the Headend-In-The Sky (HITS) platform was already 74 per cent.

The cap on the FDI limit has also been increased to 74 per cent in teleports and hubs set up for uplinking of television channels. However, the government has not made any changes to the reforms in the FM radio and TV news channels sectors, where the cap is at 26 per cent.

It may be noted that recently, the government postponed the sunset date of the first phase merely 10 days ahead of the set deadline. Even at that moment, there was a lot of inconvenience to a major part of the stakeholders (especially broadcasters and DTH players), while the other part (cable operators) was happy with the move.

However, the lifting of the FDI cap in the DTH and MSO sector has definitely stirred up another discussion in the industry. afaqs! tried to find out which side of the table is ready to leverage it and which side is not a party to the move.

The industry unanimously agrees that capital is not much of an issue for the DTH players, but for MSOs and cable operators, digitisation of the complete universe will require large investments.

Where at one end, the DTH players are moving into newer aspects of technology with more HD channels and DVR (recorders), the cable operators will have to fight for the analog-to-digital conversion.

Paritosh Joshi, strategic advisor, Ormax Media, says, "There are huge investments required, first to consolidate the highly fragmented Indian cable market, and then to rebuild the complete technical structure and set up best possible head-ends. It is a highly capital-intensive process which is tough for the individual cable operators."

A few marketers also pointed out that even in the DTH segment, the lower line of the players will find it tough to suddenly put in capital when the second phase arrives.

The industry also feels that the move has in any case come too late to be useful in the first phase. Hence, it is believed that the second phase will be able to leverage on the lifting of the FDI cap.

Ganapathy Subramaniam, CFO, Hathway Cable & Datacom, says, "The process of digitisation will require substantial capital. However, while there are strategic investors looking at an opportunity to invest in the Indian cable TV market, it may be premature to assume an immediate flow of money. It will take a longer time, may be a year or so."

He adds that the first phase, being just 40 days away, will not have any dramatic effect (from this decision). However, the second and third phases will benefit from it.

The industry also believes that the move does not aim at shorter goals or results. Gandhi of Indiacast says, "Given the longer term nature of FDI, the industry will also benefit from the technology transfer and best practices that accompany such investments. In the future, broadcasting is likely to become more screen-agnostic, with mobile-based access to linear and value added content increasing substantially. 4G is likely to help in this regard and so will the increased FDI cap in mobile TV."

Joshi adds that only the companies with special interest in the Indian cable business are being considered. "That is probably the reason why an FII wouldn't have helped. There are global companies like Comcast which are looking to enter the Indian cable business for a long time," he adds.

Media experts opine that the relaxation in FDI will entertain only those investors who target a longer haul in the Indian market, rather than a trial-and-error trick.

It is also believed that the implementation of the first phase will help investors understand the industry and the players in a better way. The real-time performances of various players will then be visible and accessible for the investors to decide where the money goes.

Joshi emphasises that the government and some major parties are apparently ignoring the fact that there is more digitisation in remote areas, due to the logistic problems of the installation of analog systems. This is because the analog system requires laying of cables, whereas the DTH system requires only the installation of a dish antenna.

As for the effect on the broadcasters, most of them unanimously agree that there will not be much of a change for them. Though digitisation will boost the broadcast industry, the FDI cap should not have any effect on it.

However, a few marketers believe that it's more about the fact that the value chain is getting funded and hence all the ends of the chain will reap benefits.

However, further postponement of the deadline may decrease the positive effect of this move. A broadcast service provider mentions, "The postponement of deadline further (if in case it happens) will only fuel the urge of the investors to keep away from the Indian market on account of lack of seriousness on the issue."

Subramaniam of Hathway adds, "I am somehow confident that the deadlines will not be postponed further. Investors who will eventually come will have a long term view about the sector."

Joshi seconds the fear of the sunset date getting pushed, and adds that it may further shake the investors' trust in the Indian cable market.

Gandhi of Indiacast says, "What this move does is to potentially expedite India's transformation from an analog to a digital ecosystem. With DAS policy in place, the objective should be to ensure that this transition occurs seamlessly and economically for consumers. Investment policies, such as the one announced, can facilitate this objective."

She mentions that there are about 60,000 independent cable operators across India and that the industry is getting consolidated on its own. Sharma adds, "They have already started cancelling the licences for smaller MSOs. With this, the larger MSOs will buy off the networks, leaving the cable operators haywire."

Broadcasters, however, have a positive opinion on the move. Punit Goenka, CEO, ZEEL, says, "A fillip for the reform process initiated by the government! Sound economic policies create a favourable environment for industrial growth and social upliftment. FDI in broadcasting that will help fund the cash-intensive digital process and treatment of the broadcast sector at par with telecom and retail is the right way forward."

While the world speaks about multiple digital connections (mobile, broadband, cable and landline telephone) through single billing, India still lags in implementation of digitisation on television. For the time being, the decision to increase the FDI cap is seen as a positive move for the long term. However, stakeholders are still apprehensive as they cautiously carry on through the countdown to the sunset date.