RIL takes controlling stakes in Den Networks, Hathway Cable for Rs5,230 cr
19 October 2018
Oil-to-telecom conglomerate Reliance Industries Ltd (RIL) on Wednesday announced the acquisition of majority stakes in Den Networks Ltd and Hathway Cable and Datacom Ltd, two of India’s major cable and wired internet service providers, for Rs5,230 crore - a deal which bring 27,000 local cable operators under its fold.
The move would strengthen RIL’s position as chairman Mukesh Ambani prepares to roll out of fibre-based broadband service to households for offering ultra high definition entertainment on large screen TVs, and disrupt broadband and direct-to-home TV services industry.
RIL will invest Rs 2,045 crore to subscribe to preferential shares and buy Rs245 crore worth of stake from the promoters to pick 66 per cent holding in Den Networks Ltd, according to a statement by Reliance Jio Ltd. It will also invest Rs2,940 crore through a preferential issue for a 51.3 per cent stake in Hathway Cable and Datacom Ltd.
Reliance Industries will also make an open offer to the shareholders of both the companies to meet Sebi norms. The deals are subject to regulatory approvals.
Investments in Den and Hathway create a win-win outcome for local cable operators, customers, content producers and the ecosystem, RIL chairman Mukesh Ambani said in the media statement. “With local cable operators now as part of the Jio ecosystem, we look forward to bringing Jio’s advanced JioGigaFiber and Smart Home Solutions to more Indian homes, even quicker.”
The investments would give RIL’s telecom arm Reliance Jio Infocomm Ltd last-mile connectivity as it aims to add nearly 50 million broadband subscribers with its JioGigaFiber broadband network targeted at homes and businesses across 1,100 cities.
The service, which will come with routers and set-top boxes for television, is expected to fuel competition in cable TV and DTH services after Reliance Jio sparked a tariff war in India’s telecom industry.
Through the investments, Reliance and Jio will be strengthening the 27,000 local cable operators aligned with Den and Hathway, RIL said in its statement. They together have 14.4 million cable and about 800,000 broadband connections.
RIL will make an open offer to existing shareholders of Den Networks and Hathway Cable. According to SEBI’s takeover norms, any entity whose shareholding in a listed company crosses 25 per cent has to offer to acquire another 26 per cent from public shareholders. RIL will also make an open offer to shareholders of GTPL Hathway Ltd, in which Hathway owns 37.3 per cent stake, and Hathway Bhawani Cabletel and Datacomm Ltd in which Hathway owns 51.6 per cent stake.
Hathway Cable offers cable services across 140 cities and broadband services across 21 cities. In the last five quarters, the company’s customer base didn’t grow. Yet, its average revenue per customer rose by Rs 10.
Den Networks, which claims to have most subscribers among cable players, has limited presence in broadband. In the last five quarters, the company’s subscriber base – cable and broadband – declined. It generates a lower revenue per user than Hathway.