By Anushi Agrawal
Who owns media? This has become a critical question as it has definitive impact on the functioning of a democracy. Ownership structures have multiple implications. The study here aims to look at the ownership structures within the Indian Cable TV distribution sector; the factors that give rise to certain ownership structures and their possible implications. This essay emerged from documentation of ownership structures of one Cable company (SITI Cable) and the factors that give rise to these structures and their possible implications. The documentation is part of a larger study on the patterns and dynamics of ownership in the TV Distribution business, within the project “Tracking Access under Digitalisation“. This essay initiates a three-part series of write-ups on three national cable MSOs in India. The series aims to present the tale of Indian Cable TV distribution sector primarily through the evolution of various national MSOs who fought to gain, retain and regain the market dominance at various points of time.
Cable TV took off in India in 1991 during the First Gulf War, the first televised war, when people started watching CNN channel for latest updates and visuals of the war. Subhash Chandra who was until then into sectors like real estate, technology, packaging, infrastructure etc. saw immense opportunities in TV media sector. In 1992 he launched the first Indian TV channel, Zee TV, and entered the cable TV distribution segment in 1994. SITI Cable Network Ltd had over 10 million subscribers as of March, 2013. SITI Cable is a part of the Essel Group, which was started in 1976 with a commodity trading and exports firm and made its early money through exports of Basmati rice globally. Today it is the largest vertically integrated media and entertainment group and also one of the leading producers, content aggregators and distributors of programming globally. SITI Cable started as a 100% subsidiary of Zee Telefilms Ltd, which was rechristened Zee Entertainment Enterprises Ltd (ZEEL) after a major restructuring of the businesses in 2006. As in March 2013, SITI was a publicly-listed company, whose promoters included neither ZEEL nor Zee Media, but a group of corporate entities and individuals.
In 2006, the Essel Group decided to restructure its various media-related businesses in a bid to achieve greater synergies in operations and management. Zee Telefilms was renamed ZEEL. The cable distribution operations of ZEEL and SITI Cable were combined into a third new entity, Wire and Wireless (India) Ltd (WWIL).
The evolution of ownership matrix of SITI was influenced by the growth of the industry and emergence of various competitors in the market. Therefore, in mid 2000s when other players in the market adopted an aggressive M&A strategy, SITI Cable also followed suit to retain market dominance. Being the first mover in the industry, it seems like SITI had initially grew largely through the organic route; experimenting and working with the trusted networks but gradually it followed the corporate way of functioning. As on March 31, 2013, SITI Cable, the parent company, owned 13 subsidiaries, five fellow subsidiaries and eight companies under significant influence. Before the demerger of the cable businesses in 2006, and the formation of WWIL, the company had three subsidiaries. From 2007 onwards, SITI Cable intensified its M&A activity. Within six years 2007-08 and 2012-13, it had 13 subsidiaries, or an over four-fold increase. Its biggest buyout was in 2010-11, when it acquired 50.65% stake in SITI Vision Digital Media Private Ltd for Rs 82.23 million.
Some of the companies within the group have interlinked ownership. For example, Smart Vinimay had a 20% stake in a SITI Cable subsidiary, Indian Cable Net Company. The corporate shareholders of Smart Vinimay were Hitech Visual Channel Pvt Ltd (39.21%) and Haridwar Traders Pvt Ltd (35.24%). The remaining stakes were held by several individuals, who were largely the employees of SITI Cable. Interestingly, the corporate shareholders of Hitech Visual were Smart Vinimay (48%) and Haridwar Traders (32%). Finally, one of the two corporate shareholders of Haridwar Traders was Smart Vinimay (43.29%). Hence, it seems like these are four different companies but we scratch the surface and find out it is essentially the same group of people running these four companies.
Such linkages between group and promoter entities are common in several Indian companies and business houses. Originally, these are usually evolved to hide, rather than reveal, the ownership of the firms. This was largely for wealth tax and corporate tax purposes. It is also often a trend in corporate houses to appoint employee of the parent company as directors in subsidiaries and other group entities. This is done to ensure that uniform policies are adopted across the group and to prove to potential investors that they have management and shareholding control. In contrast, some of the key employees of SITI cable are both director and minority shareholder in many of the subsidiaries and fellow subsidiaries of the parent company. Promoters usually retain the majority stakes in their group company to retain control but interestingly, in SITI promoters have absolutely no control in some of the fellow subsidiaries. Below is an example of the same.
Interestingly, none of promoter entities or individual has any stake in these companies. As illustrated above, many of the employees of the Essel group are directors and shareholders in related companies.
SITI Cable is a company that has competition at home. The other arm of the group, Dish TV is into DTH sector which offer similar services and targets almost the same audience. The group has strategically expanded in both cable and DTH market. Dish TV and SITI Cable’s 2006-07 annual reports hint that the strategies related to cable distribution and DTH were linked to each other and the general digitization drive across the country. It looks like the focus area of the two companies was largely different. In the year 2006-07, while SITI was present in 43 cities, most of them were Tier-I cities, Dish TV focused on 4,000 towns mostly Tier-II and Tier-III ones. Hence, it looks like there was an informal strategy in the simultaneous and parallel growths of the two competing technologies, cable TV distribution and DTH. The entry of DTH and government’s mandatory endeavor to ensure cable digitization influenced the ownership matrix of SITI Cable. As the company’s growth and expansion was largely determined by these initiatives, it logically forced SITI Cable to acquire specific companies in specific geographies over the years. Its presence increased from 58 cities in 2011-12 to 80 in 2013-14 including a few Tier II and Tier III cities.
Being a first mover proved advantageous for SITI Cable as it emerged as the largest MSO in the country in the mid 2000s, although it lost its leading position to Den Networks and Hathway Cable & Datacom in the recent past. However, the first-mover advantage led to regular and consistent changes in both the promoter entities that owned SITI Cable and the ownership matrix that evolved over two decades.