Indian government has approved hike in FDI for all TV distribution platforms from 49% to 74%. This will provide a huge boost to digitization. Now, the FDI cap will be uniform across various platforms like DTH, cable, Head-end In The Sky (HITS) and mobile TV. Initially, only the HITS distribution platform had permission for 74% FDI. With estimates of ~INR250bn-INR300bn funds required for the entire digitization process, relaxation in FDI limits will be critical for MSOs and DTH players like Hathway, DEN, WWIL and Dish TV to fund their capex requirements. We expect the digitisation process to speed up considerably over the coming months given this step, government remaining firm on deadline, regular ads on digitization (by government, DTH and cable companies) and many inter-connect agreements in place.
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FDI limit hiked to 74% from 49% for cable and DTH operators
While DTH providers too require capital to expand their base, they have easier access to capital compared to most of the cable operators. Thus, this hike in FDI is aimed at boosting foreign direct investment in MSOs to fund digitisation. Currently, because of the issue of under-reporting of revenues, FDI in MSOs is far lower than 49%. Out of the 74% allowed, 49% will be under automatic route. Anything above 49% will require the FIPB nod.
Distribution companies to have better access to funds
The increase in FDI limit will give TV distribution companies, especially MSOs, access to foreign funds, which will help satiate the funding requirements of the digitization process, especially from Phase 2. The Ministry of Information & Broadcasting (MIB) has been regularly advertising to educate subscribers about the approaching Phase 1 deadline on October 31, 2012.
Top Picks: Hathway Cable & Datacom, Dish TV, ZEE
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