Through its deal with TV18, Reliance Industries (RIL) seems to have set its sights on many objectives. One, the company has set the ball rolling on content access for its planned telecom broadband foray. Two, it may gain a toehold in leading media companies – Network 18 and TV18. Finally, the company has made a profitable exit on its stake sale in various ETV channels.
RIL which through group companies had invested Rs 2,600 crore in the ETV news, entertainment and Telugu channels has agreed to sell a chunk of its stake to TV18. Going by TV18's announcement, the sale consideration may be to the tune of Rs 2,100 crore. RIL claims to have made a profit on the sale, and after the deal, will still continue to hold 50 per cent stake in the entertainment channels, and 24.5 per cent in the Telugu channels. Another important quid-pro-quo for RIL is preferential access to all content of Network 18 and TV18 for distribution through the 4G broadband network being set up by Infotel Broadband, a subsidiary of RIL. Infotel was the sole nationwide winner in the wireless broadband auction in 2010. The agreement for preferential content access seems to be indicative of RIL's intent to establish itself as a formidable player in the wireless broadband business.
Funding the sale
Network 18 and TV18 plan to raise funds for the acquisition of the ETV channels through rights issues. RIL has agreed to fund the promoters' contribution to these rights issues through a trust subscribing to optionally convertible debentures issued by the promoter companies of Network 18 and TV18. The funding which may be to the tune of Rs 1,700 crore, could enable RIL to gain an entry in these media companies, if and when the debentures are converted into equity in the future.
After the scrapping of the non-compete agreement with the ADAG Group in 2010, RIL was quick to announce its entry into new sectors such as telecom, financial services and power. The latest deal with TV18 seems to suggest increased thrust in its telecom plans. RIL is flush with cash (Rs 61,490 crore as on September end) and markets have been concerned about the company's problem of plenty. The fresh momentum may assuage these concerns to some extent.