Zee Board clears restructuring proposal

Eleven subsidiaries of Zee Television Ltd (ZTL) will cease to exist. The entire process is expected to be complete in approximately six to eight months after taking all regulatory approvals.

Sources indicate that the move is to clear the way for a strategic investment in the company, including the possible sale of equity to a global media major. The unwieldy corporate structure of ZTL was seen as a possible dampener of any interest in investing in the company, and the current move is to address this fear, say analysts.

The year 2001 was a mixed bag for the company. None of its new programmes, launched mid-last year in a blitz, have done well. Last year, the company also disinvested its stake in three subsidiaries - Buddha Films, Zee Sports and Zee Publishing Ltd. On the good side, it's movie Gadar did extremely well at the box office, and the company posted an after tax profit of Rs 83.38 crore in the last quarter, ending December 31, 2001.

In the new restructuring, the company will cut down the number of its subsidiaries from 23 to 12. The Indian companies that will be shut down are E-connect India, Programme Asia Trading Company, Elzee Television, and the two regional channels owned by ZTL, Kaveri Entertainment (Tamil) and Dakshin Media (Kannada). The foreign companies that will be shut down are Winterheath Company, Mauritius, Hokushan Trading, Hong Kong, Expand Fast Holdings, and Zee Multimedia Worldwide, both in the British Virgin Islands, Asia TV in the United States, and Zee TV SA (proprietary), South Africa.

Analysts point out that the failure of its new programmes, combined with the stagnation of the Rs 3,500-crore television advertising market, has mounted considerable pressure on the company's bottomline. Around 60 to 70 per cent of Zee's revenue comes from advertisement. Though the channel has close to 30 lakh paying subscribers and subscription revenues have moved up from 20 per cent, two years ago, to over 32 per cent in the last quarter, the Achilles' heel of this model has been the low reportage of actual cable TV usage by the operators. With none of its new programmes doing well, the company is now on the look out for new revenue sources, including the sale of equity.

The Board of Directors of ZTL cleared the present corporate restructuring proposal, in order to "optimise shareholder value," according to an official release. In a statement released to the press, Subhash Chandra, chairman of ZTL, said, "This restructuring highlights Zee's continued commitment to create value for shareholders and ensure better business practices," Sandeep Goyal, Group Broadcasting CEO of Zee Telefilms said in the same statement, "In the past few years, because of both organic and inorganic growth, the corporate structure of Zee had become multi-layered and complex. Also, due to subsequent changes in the regulatory and tax framework, inefficiencies had crept in. We aim to achieve better tax-efficiency and leaner corporate structure by reducing the number of subsidiaries from 23 to 12."

In the proposed new structure, the parent company, ZTL India, will wholly own Siticable Network India, India's largest cable distributor company, Zee Interactive Learning Systems India, Zee Multimedia Worldwide, Mauritius, Asia TV, UK, Zee TV Inc, USA, Expand Fast Singapore Pte, Software Suppliers International, Mauritius, Asia TV Africa, Mauritius, and Zee Telefilms International Ltd. Zee will also continue to hold a 76 per cent stake in Zee Turner Private Ltd, a channel distribution joint venture with AOL Time Warner's Indian unit.

The move is of significance because Zee is India's largest privately-owned media and entertainment company, and the largest producer and aggregator of Hindi programming in the world with an extensive library housing television content, movie titles and news content. Zee's channels cater to an international South Asian audience, and the company has significant interests in film production, music publishing and education business. © 2002 agencyfaqs!