New Trai proposals dont amuse media, entertainment sector

Written by Anushree Chandran | Mumbai | Updated: Aug 5 2014, 06:01am hrs
The recently issued recommendations for direct to home (DTH) companies by market regulator Telecom Regulatory Authority of India (Trai) threaten to send the Rs 91,800-crore media and entertainment sector into a tail-spin, as it seeks to curb monopolies and restrict cross-holdings in distribution platforms.

As per the regulator, a vertically aligned broadcaster can be permitted to control only one distribution platform operator. But corporate entities like the Essel Group, the holding company of Zee Entertainment Enterprises Ltd, have their fingers in multiple pies. For instance, Essel has television broadcast channels under Zee, direct-to-home service Dish TV and cable service Siti Cable, to name a few, under it. Similarly, the Sun network owns and operates television channels under the Sun TV brand, a cable service under Sun Cable Vision (SCV cable) and a direct-to-home service under Sun Direct.

Expectedly, the recommendations have elicited a mixed response. There should be no cross-holding restrictions in a highly competitive industry landscape, said Mahesh Kumar, managing director of Sun Direct DTH, adding that they were expecting licence fees to be reduced to 6% of gross revenue. We welcome the Trai move on the overall reduction of the licence fees. However, we strongly feel that content costs should also be allowed as pass-through, which is consistent with Trais previous view and also upheld by TDSAT in its judgment on direct-to-home. Adjusted gross revenue or otherwise, we were expecting licence fees to be reduced to 6%. We will make a representation to the ministry to seek further reduction, he said.

A Dish TV executive, on condition of anonymity, said the 8% fees on adjusted gross revenue was far lesser than what they had anticipated. They had been pushing for 6%. The cross-holding proposal was blatantly unfair to some broadcast groups, who will be forced to exit and give up businesses that they had built over time, he said. Direct-to-home companies have been incurring losses due to licence fees, coupled with service and entertainment taxes, said Ashish Pherwani, partner, advisory services, Ernst & Young. This is also a capital intensive business since it involves technology, set-top boxes and a consumer redressal system.

Dish TV India, for instance, reported a net loss of R16 crore for the quarter ended June 30. The company had reported a net profit of R31 crore in the year-ago quarter. The companys total subscriber base stands at 11.7 million.

However, Tata Skys chief executive officer Harit Nagpal felt the recommendations are a breath of fresh air for an ailing industry. We hope that they are implemented at the earliest. Since these recommendations have been crafted after deliberations with industry stakeholders, it would be a wasted effort for both the regulator and the companies involved if they dont come into force, he said, adding, Even if there is a rationalisation of a mere 1-2% on licence fees, it still makes a difference. One-third of our revenue, not profits, is taken by the licence fee, entertainment and service taxes. We are the only category that pays tax on the same service to both the state and central governments.

Nagpal felt that the guidelines pertaining to cross-holding were long overdue and are equivalent to the regulator setting the house in order. Its obvious that when a business reaches a certain stage of development, the regulator will have to curb monopolies and make sure that its a level playing field for all, he said.

Roop Sharma, president of Cable Operators' Federation of India, an apex body for cable operators, said the recent recommendations by the Trai are just an eyewash and a waste of public time and money. Since 2004, there have been 52 recommendations (guidelines) issued by the Trai. How many of them have been accepted by the information and broadcasting ministry Monopolies continue to fester and thrive in the industry, she said.