Reliance Jio to tie-up with Den Networks for fiber launch?

A day after Reliance Industries said it would not comment on media speculation about acquisition talks with Den Networks, the cable company has issued a largely identically worded statement. However, the statement seemed to indicate the possibility of a tie-up or agreement rather than an outright sale of the company.

“The company, as a running enterprise considers/evaluates various options to grow our business and strengthen our market position and engage in discussions in this behalf,” it said, adding that it would not want to comment further on media speculation.

The statement assumes significance as last week, Den Networks said it received Company Law Tribunal permission to spin off its broadband business into a wholly owned subsidiary company.

It is possible that it could sell a substantial stake in the subsidiary to Reliance Industries, though the possibility of a sale of the unit cannot be ruled out.

The stock had gained 6% in early trade yesterday on acquisition rumors, but gave up much of the gains by the close of the session. It has traded largely flat today at 90.40 rupees on Thursday.

Yesterday, Reliance Industries had said it was “unable to comment on media speculation and rumorsm,” but it “evaluates various opportunities on an ongoing basis.”

A tie-up with Jio will help the cable company take a stronger broadband offering to its customers.

Den Networks has not been able to keep pace with competitors like Hathway as far as diversification into the broadband sector has been concerned.

It had broadband subscription revenue of just 21 cr rupees last quarter, out of the total revenue of 313 cr.

Total number of broadband subscribers was only around 2 lakh, compared to 1.1 cr digital cable subscribers, indicating that 98% of its digital cable customers have not yet been converted to its broadband users.

This fits well with the business case of Jio, which is rolling out an advanced cable and broadband service which will allow users to rewind and fast-forward all TV programs on the service.

The Mukesh Ambani-led firm will also be offering fiber-to-the-home connections where possible and cable broadband in other places.

While cable operators like Hathway have converted a substantial chunk of their customers into broadband customers, companies like Den Networks, which are in the early stages, offer a lucrative target for conversion.

However, like most other big cable companies, most of Den’s customers are not ‘owned’ by the company, but by a local partner, which has been an impediment to speedy conversion, which limits the utility of a company-wide acquisition.