India’s largest telecom player, Airtel, has long been in talks to sell a stake in its DTH (direct to home) arm, Airtel DTH. Now it appears as though the company has finally received an FDI approval to complete this transaction.
Airtel’s FDI approval:
The Sunil Mittal owned telecom giant Airtel has finally received the approval from the Indian Government to sell a 20% stake in its Airtel DTH arm to Warbug Pincus, an American Private Equity Investment Firm.
The company had announced the deal, which is worth close to $ 350 million, as early as December last year. However, the deal wasn’t officially completed owing to an approval from the Indian Government. Now a source close to PTI claims that the company has received an official go-ahead from the government to complete the 20% stake sale in Bharti Telemedia. The news is yet to be made official as of now.
Exiting the business?
When Airtel was contacted regarding this news, a spokesperson declined to offer a comment on this news. The deal is structured in a manner where Bharti Airtel will be giving up 15% of its stake in the company with another 5% being sold by a different Bharti owned entity.
This move is largely being looked as an exit from the DTH business or at least a partial one. The DTH industry has been extremely competitive in the recent few years with several new players entering the industry and offering services at throwaway prices. In addition to this, the entry of Reliance Jio is another cause for concern for most players in the industry, including Airtel.
Reliance Jio is all set to launch its Jio GigaFIBER broadband services shortly and it has also announced that it would be bundling in a set-top box / direct to home services along with the broadband service. The set top box will be enabled by the broadband services and will be able to stream Live TV much like any other set top box services.
This is certainly a threat, especially considering that the company is largely associated with undercutting prices and tariffs set by existing players when it attempts to disrupt an industry. The company’s entry is largely being viewed as a serious threat to all existing DTH players as well as cable providers, as they expect a further drop in revenue and average revenue per user.
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This isn’t new, as Reliance Jio’s entry into the Indian market caused severe disruption and eroded the average revenue per users (ARPU) of all major telecom providers significantly. Now the Indian DTH providers face a similar situation and Airtel is looking to mitigate this risk, by reducing its exposure to the DTH industry with the sale of the stake in its DTH arm.
The company is currently one of the largest direct to home service provider in the Indian market and has a significant 20 per cent market share in the DTH industry. Its main competitors in this space are Tata Sky and Videocon DTH, which are the two biggest players with 22% market share for each company.
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Competition in the DTH Space:
It will be interesting to see how competitors of Airtel will be managing Reliance Jio’s entrance into the DTH space. On the other hand, Airtel is also looking to take on Reliance Jio’s GigaTV services in the firm of an IPTV quad play platform, which has been branded as Airtel Home. This will be a one-stop solution for all home-based requirements including DTH, broadband as well as post-paid services, all offered by Airtel through its different units.
The post Airtel Gets FDI Approval to Sell 20 Percent Stake in DTH Business to Warburg Pincus appeared first on MySmartPrice.
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