January 2010

NDTV TO SELL IMAGINE TO TURNER

Turner International is acquiring 92% stake in NDTV Imagine.

In a filing with the Bombay Stock Exchange, New Delhi Television Ltd (NDTV) confirmed that it had entered into an agreement with Turner Asia Pacific Ventures (TAPV) to sell most of its indirect stake, held through its subsidiary NDTV Networks, in NDTV Imagine.

NDTV said that the total size of transaction is $117 million (Rs 546.03 Crore) and the deal involves the sale of 76% of NDTV Imagine for a consideration of $67 million (Rs 312.68 Crore) together with TAPV's subscription to fresh shares for another $50 million (Rs 233.35 Crore). Prior to issuance of primary shares to TAPV, NDTV Networks will retain a stake of 5% in Imagine.

This was confirmed by Turner International India managing director Anshuman Misra, "Turner International has signed an agreement in principle to acquire 92% of NDTV Imagine, subject to regulatory and Time Warner board approval. We will provide complete details upon board approval."

GOOD PRICE

Industry analysts believe that NDTV's stake sale in NDTV Imagine has fetched a good price. If the NDTV Imagine's number 5 Hindi GEC ranking and revenues generated by the channel's peers is taken as a yardstick, the sale price to Turner is higher than what was expected.

The $67 million (Rs 312.68 Crore) Turner is paying for 76% in NDTV Imagine, pegs NDTV Imagine's value at Rs 410 Crore.

In the GEC market, the top 3 players dominate the television rating points (TRPs) and, therefore, garner a lion's share of all advertising revenues. The Hindi GEC genre accounts for over 25% of the Rs 8,000 crore-plus TV advertising pie. NDTV Imagine is fifth in terms of viewership, with an audience share of approximately 8%, according to data from TAM Media Research.

Colors, the market leader in the GEC space, hopes to generate Rs 500 crore in advertising revenues and Rs 100 Crore in subscriptions by FY10.

Zee TV may earn somewhat lower ad revenues, but probably bags higher subscriptions, since its distribution has been established far longer than Colors.

NDTV Imagine is a Free-To-Air channel, and therefore does not earn any subscription revenues. Considering this, Turner's price does seem generous.

OTHER STAKE HOLDERS

NDTV Network, the holding company of the entertainment channel, holds a 72.5% in NDTV Imagine, whereas employees hold another 20%.

According to reports, film director Karan Johar holds a 5 % stake in the company.

Since Turner is buying a 92% stake and NDTV will continue to hold a 5% stake, post sale, most of the other stake holders in NDTV Imagine will receive handsome returns for their stake.

NDTV TO PAY OFF DEBT

As reported in SCaT November, in May 2008, media conglomerate NBC Universal had paid US $ 150 million (approx Rs 700 Crores) for a 26% stake in NDTV's holding company - NDTV Network. NBC Universal was reportedly unhappy with NDTV's performance, and preferred to exit the company, rather than increase its stake to 50% as per its original option. The Imagine Stake sale and the US $ 55 million ( approx Rs 250 Crores) will help NDTV pay off the (undisclosed) buy back price to NBC Universal.

"This deal will enable NDTV to become debt free at the consolidated level. It will also provide NDTV Imagine with enough funds for operations," NDTV Networks Chief Executive Officer Vikram Chandra told PTI. NDTV had debt of Rs. 112 crore as on March 31, 2009.

Industry sources say the move is part of a 4 stage restructuring plan being undertaken by NDTV networks.

NDTV TO FOCUS ON NEWS ?

The stake sales suggest that NDTV may be focusing more on its news operations and channels rather than on GECs or lifestyle-based channels, both of which require heavy cash infusion for programming.

NDTV's News channels are well placed in the news genre, in the second or the third rank.

In contrast, NDTV's 3 non-news channels (NDTV Imagine, NDTV Lifestyle & international movie channel NDTV Lumiere) have been loss making ventures since their launch.

As reported in SCaT, a couple of months ago NDTV sold 69% stake in its lifestyle programming subsidiary NDTV Lifestyle to US-based Scripps Networks Interactive, for $55 million. NDTV Imagine runs a channel by the same name, apart from NDTV Lumiere which is a low cost, non English language international movie channel.

The NDTV Imagine sale brings the curtain down on NDTV's non news channel business.

SAMIR NAIR & IMAGINE

NDTV Imagine is headed by Ex STAR India CEO - Sameer Nair. At STAR India, Nair was the programming whiz credited for launching KBC on STAR Plus. That one program single handed catapulted the channel as the undisputed Uno Numero Hindi GEC channel.

However, Sameer Nair as CEO of NDTV Imagine has failed to raise the channel above its meager number fifth ranking in the expensive Hindi GEC genre.

While not reported, it is probable that Sameer Nair was offered a stake in NDTV Imagine, when he joined the new channel as its CEO. There is no information on whether Nair has sold his stake to Turner, and whether he will continue as the channel CEO, after Turner take over control.

TURNER INDIA

Turner International, part of the Times Warner group, the fourth-largest entertainment conglomerate in the world (after Walt Disney, NewsCorp and Viacom), already has presence in India through children's channels like Cartoon Network and Pogo and English movie channel WB and news channel CNN.

It also has a joint venture with the Zee Network through which it distributes 35 channels in India, including the Zee and the Turner bouquet. Times Warner also has a content sharing and branding agreement for CNN-IBN.

TURNER - IMAGINE & REAL !

A couple of years ago, Turner - in a 50:50 joint venture with Miditech (promoted by the Alva brothers) launched the 'REAL' Hindi GEC channel. That channel has been a non-starter, and is currently only in a sustenance mode, carrying re-runs of its shows, for the past several months. REAL's CEO - Sunil Lulla also quit last month.

Hence it could be argued that Turner does not have what it takes to successfully run a leading Hindi GEC channel.

Also, Turner has preferred to pay Rs 546 Crores for a second Hindi GEC Channel, rather than buying out and re-vamping its REAL Hindi GEC channel. Will Turner get lucky, second time around ? n