Mukesh Ambani (left) went to sleep last night as India’s richest man and woke up this morning as also India’s biggest media mogul. That, in a nutshell, is the sum and substance of the dramatic announcement by Reliance Industries Limited (RIL) that it was getting into a tie-up with Raghav Bahl‘s Network18.
The tie-up means an RIL subsidiary will pump funds into a rights issue by Bahl’s Network18 that is deep in the red. This will help the latter pare down its debts and it will also help it pick up RIL’s stake in the Eenadu Television (ETV) channels owned by southern media strongman, Ramoji Rao.
Although RIL has said the investment will be done by way of an independent trust and that Raghav Bahl and team will have full control, in effect, it means overnight Mukesh Ambani’s direct and indirect shadow will be over at least three English news channels (CNN-IBN, NDTV, NewsX), a top flight business news channel (CNBC TV18), and a clutch of language channels.
With younger brother Anil Ambani too reported to be in the media in ways unseen and unreportable, and with the two warring brothers doing a recent jig together, the RIL-Network 18 tieup raises troubling questions over the hold of India’s biggest corporate house on the media and the potential for the creation of a media duopoly.
Today’s RIL announcement of a tie-up with Network 18 confirms a Business Standard story last month and makes nonsense of a Times of India story the following day that Rajeev Chandrasekhar was picking the ETV channels. The announcement also confirms a Wall Street Journal report which had been vehemently denied by RIL.
The only official previous RIL involvement with the media was when it bought the Sunday Observer and launched the Business and Political Observer in 1991. Both those ventures were soon shut.
Below is the full text of the RIL press release:
MUMBAI, 3 January 2012: RIL today announced that a part of the interest owned by it in the ETV Channels is being divested to TV18 Broadcast Limited (TV18). As a part of the deal, Infotel Broad Band Services Limited (“Infotel”), a subsidiary of RIL, has entered into a Memorandum of Understanding with TV18 and Network18 Media and Investments Limited (Network18) for preferential access to all their content for distribution through the 4G Broadband Network being set up by it.
As per the Memorandum of Understanding, Infotel shall have preferential access to (i) the content of all the media and web properties of Network 18 and its associates and (ii) programming and digital content of all the broadcasting channels of TV18 and its associates on a first right basis as a most preferred customer.
Infotel is setting up a pan India world class 4th Generation Broadband Network using state of the art technologies. Infotel expects to take a leadership position in content distribution through broadband technology through a host of devices. Digital content from entertainment, news, sports, music, weather, education and other genres will be a key driver to increase consumption of broadband.
RIL, through investments of about Rs.2600 crores, by its group companies, currently holds interest in various ETV Channels being operated and managed by Eenadu Group viz. (i) 100% economic interest in regional news channels, namely ETV Uttar Pradesh, ETV Madhya Pradesh, ETV Rajasthan, ETV Bihar and ETV Urdu channel (“News Channels”) (ii) 100% economic interest in ETV Marathi, ETV Kannada, ETV Bangla, ETV Gujarati and ETV Oriya (“Entertainment Channels”) and (iii) 49% economic interest in ETV Telugu and ETV Telugu News (“Telugu Channels”).
A part of the above investments comprising of 100% interest in News Channels, 50% interest in Entertainment Channels and 24.50% interest in Telugu Channels is being profitably divested to TV18 Broadcast Limited.
Network18 and TV18 have today announced that both the companies are raising funds for the acquisition of ETV Channels through a Rights Issue.
Independent Media Trust (“Trust”), a trust set up for the benefit of Reliance Industries Limited, has agreed to fund the Promoters of Network 18 and TV18 to enable them to subscribe to the proposed Rights Issue announced by both the companies today. The Promoter Companies of Network18 and TV18 and the Trust have entered into a Term Sheet under which the Trust would be subscribing to the Optionally Convertible Debentures to be issued by the Promoter Companies.
Reliance will leverage its deep understanding of the Indian markets – consumer insights, technological expertise, and the ability to build & manage scale – to make this a “win win” partnership. This will create value and be accretive to the shareholders of RIL.
Raghav Bahl and his team will continue to have full operational and management control of both the companies. Raghav Bahl and the current Promoter Entities of Network18 and TV18 will continue to retain control over Network 18 and TV18. RIL reposes full faith in the current leadership and management team of Network18 and TV18.
The investments in these media properties are being made by RIL through an independent trust which will have eminent individuals as Trustees, thus preserving the management, operational and editorial independence of these media companies.
The investment by the Trust in the Promoter Companies of Network18 and TV18, and the arrangement between Network18/TV18 and Infotel for the acquisition and distribution of content on the Infotel platform, is one of many such partnership initiatives being undertaken by Infotel.
The combination of India’s leading TV content provider, with a bouquet of nearly 25 channels, and Infotel, will be a significant step in bringing a high quality “live TV” experience to broadband customers across the country. Likewise, Network18’s market-leading web portals and e-commerce operations will provide several value added services to Infotel’s broadband subscribers. This unique alliance is expected to differentiate Infotel and create value for all stakeholders.
External reading: The column The Hindu didn’t publish