Zee Network set to take controlling stake in ETC

By , agencyfaqs! | In | February 19, 2002
Zee Telefilms' buying into ETC Networks would give Zee direct access to the Punjabi Diaspora and market leadership in the Hindi music segment

The news took most media folk by surprise. Zee Telefilms and ETC Networks informed the Bombay Stock Exchange on Monday that they have signed a memorandum of understanding by virtue of which Zee was to buy out a major chunk of the promoters' - Yogesh Radhakrishnan, Yogesh Shah and Jagjit Singh Kohli - stake in ETC Networks. Zee reportedly paid Rs 178.40 million for 5.66 million equity shares, which represents 48.38 per cent of the issued and paid-up share capital of ETC.

The duo also announced that Zee would acquire a majority stake through a preferential allotment for which it has earmarked around Rs 7 crore. Once the transaction was complete, Zee Group would hold around 59 per cent stake in ETC, Zee Telefilms' chief executive officer (Broadcasting) Sandeep Goyal, told newsmen. In accordance with Sebi guidelines, Zee would make an open offer to all shareholders over the next three months.

Zee's move to take a stake in ETC comes at a time when cable operators and broadcasters are fighting a pitched battle over carriage of channels in the prime band and hikes in subscription charges. This is the second major announcement by Zee in recent months. Earlier, it had entered into a strategic partnership with Turner India for joint distribution of channels. ETC Networks' promoters see the latest arrangement as "a strategic investment" by Zee Telefilms.

For the record, ETC Networks runs two free-to-air satellite channels - ETC Punjabi and the ETC Music - in digital mode. The two ETC channels would join the 17-channel bouquet of Zee-Turner for distribution both within and outside the country.

The news had not quite sunk in when agencyfaqs! contacted media professionals in Delhi and Mumbai for their reactions. Mukul Kansal, vice-president, client servicing, HTA, Delhi, offered his views on what could have motivated Zee to pick up controlling stake in ETC. "Such consolidation typically happen on the issue of profitability. For the average viewer, there are about 60-70 channels available - of which he views a chosen two or three. And there are those fringe five or six channels that he may or may not watch, depending on what's on. It's like any other FMCG product. There is scope for just so many. So when the players start feeling the heat, it is an opportunity for the market leader to pick up the weaker players at a cheap price."

Not everybody thinks the move would prove to be in Zee's advantage though. Comments an agency head based in Mumbai, "When STAR bought out Vijay some time back, it made sense to me because it was the case of a very strong brand acquiring a somewhat weaker brand to get a toehold in a new market. While in my view Vijay hasn't quite lived up to the expectations yet, it did make sense as a strategic move on part of STAR at that point in time. I find this (Zee-ETC) deal quite puzzling."

What is apparent however is that Zee Telefilms' buying into ETC Networks would give Zee a direct access to the Punjabi Diaspora and market leadership in the Hindi music segment. ETC has the exclusive telecast rights for beaming Gurbani live from the Golden Temple at Amritsar for 11 years and that is a major draw with audiences in Punjab and with NRI Punjabis.

"Zee is obviously looking to capitalise on the demand for Gurbani in overseas markets such as the UK, Canada and the US," observes a Mumbai-based research analyst. Indeed, if sources at Zee are to be believed, Zee's international feed would soon add Gurbani to its existing repertoire of programmes. Moreover, Zee Records would help ETC propagate the Gurbani in both audio and audiovisual media.

That apart, the strategic buy would also help Zee consolidate its cable distribution network, opines a Delhi-based marketing head of a publishing house that has interest in the cable industry. ETC's promoters have a stake in WinCable, a cable distribution network with a strong presence in Mumbai and Delhi. Sources close to the deal indicated that WinCable and Zee's cable distribution arm Siticable are already in talks to improve the visibility of each other's channels in their respective networks. No confirmation on this was available from Zee.

The fate of Zee Music and Alpha Punjabi is not clear as both lag behind the ETC channels. However, Goyal assured the media that all the brands would maintain their distinctive identities under the new dispensation. The new combine claims to command a marketshare of 58 per cent in the Punjabi segment and 46 per cent in the Hindi movie segment. © 2002 agencyfaqs!

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