Reliance Industries made a strong pitch to the thousands of local cable operators associated with cable feed providers Den Networks and Hathway Cable and Datacom as it announced its purchase of the two companies.
Reliance will spend Rs 2,290 cr for a 66% stake in Den Networks, and Rs 2,940 cr for a 51.3% stake in Hathway Cable and Datacom.
Rajan Raheja Group, the current promoters of Hathway, will continue to be a promoter in the new entity.
The move is looked at with tremendous anticipation and interest because it will be the first large-scale attempt to introduce consolidation in India’s notoriously fragmented cable TV sector.
There are over tens of thousands of cable TV networks in India. Den and Hathway alone with relationships with 27,000 of them in 750 cities, accounting for most of the 24 million customer households served by the two networks.
Because they cannot all set up the head-end (satellite reception center), they take their feeds from the likes of Den and Hathway. They also lease set-top-boxes to decrypt the encrypted signals and depend on these larger firms for billing and provisioning services as well.
However, they have so far proven to be tough customers when it came to sharing subscriber revenue from non-cable services such as fiber broadband.
They also have the right to change their upstream providers, and often do so for getting better deals.
As such, Reliance will have the unenviable task of negotiating with these 27,000 local cable operators and arriving at a mutually acceptable solution for launching new services like broadband.
It is also possible that the company’s rivals, like Bharti Airtel, may also enter the scene and directly offer broadband partnership deals with local cable operators to prevent them from going to Jio.
“The LCOs (local cable operators) have been steadily losing market share because of increasing competition from alternate technologies like Direct-To-Home (“DTH”),” Jio said, unveiling its pitch.
“DTH operators have weaned away over 60 million homes from cable operators who have remained basic TV service providers. With this trend, both the LCO business model and the MSOs are under stress.
“Through this transaction, Reliance and Jio will be strengthening the 27,000 LCOs that are aligned with DEN and Hathway to enable them to participate in the digital transformation of India through (a) access to superior back-end infrastructure; (b) tie-ups with content producers; (c) access to latest business platforms to improve business efficiencies and deliver customer experience; and (d) investment in digital infrastructure for connecting customers,” it said.
It indicated that it was not trying to replace them or make them redundant. Instead, it said, they would continue to serve the role of providing door-to-door customer service.
“The LCOs will continue to do what they do best – provide localized, intimate, people-friendly and ultra-fast customer services. This will create multiple future opportunities for LCOs as Jio rolls out new services and platforms,” it said.
Many LCOs, in fact, tie up with large telecom players and offer their own branded Internet services using ethernet cables and fiber optics.
Jio said it has an initial target of connecting 5 crore homes with its Gigafiber cable-cum-broadband service.
It said it can now work with “Hathway and DEN and all the LCOs to offer a quick and affordable upgrade to a world-class lineup of JioGigaFiber and Jio Smart-Home Solutions”.
“This will accelerate Jio’s commitment to connect 50 million homes with JioGigaFiber in the shortest possible time,” it added.
RIL Chairman Mukesh Ambani said he was happy to join hands with Rajan Raheja of Hathway and Sameer Manchanda of Den.
“Our investments in DEN and Hathway create a win-win-win outcome for the LCOs, customers, content producers and the eco-system.
“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.
“We look forward to welcoming other MSOs and LCOs to be part of this partnership. This will result in growing wireline data connectivity in India and making state-of-the-art highspeed affordable internet and digital services accessible to the widest population in the shortest possible time,” he said.
Some of the services that Jio GigaFiber will offer are UHD broadcast, video conferencing, Virtual Reality gaming and shopping and smart-home solutions based on Internet-of-Things.