Two-tier FDI cap in media finalised

Written by Ashish Sinha | New Delhi | Updated: Dec 19 2011, 08:24am hrs
With the ministry of finance giving its nod, the decks have been cleared for the implementation of a simplified, two-tier policy on foreign direct investment (FDI) cap in media.

Now, a 74% uniform cap for non-news media (carriage services) and a 26% cap for news media (content) shall apply. Also, up to 49% FDI in the carriage service providers (like multi-system operators or MSOs, DTH broadcasters, headend-in-the sky or HITS operators, and providers of mobile TV, satellite teleport and IPTV services) will be automatically allowed. But any FDI above 49% will need Foreign Investment Promotion Boards nod. FE was the first to report this in February.

So far, the FDI caps in media range from 26% to 100% with variable caps of 49% to 74% for carriage service providers. Also, currently there are FDI caps within the permissible foreign investment norms for cable and DTH companies.

The inter-ministerial consultation process on this proposal concluded last week and now the department of industrial policy and promotion (DIPP), the nodal body for FDI caps across sectors, expected to present the matter to the Cabinet shortly, government sources told FE.

The finance ministry supports the DIPP proposal for allowing 74% FDI in broadcast carriage services and 26% in content services, a senior DIPP official said.

The move is aimed at getting the required funding. According to the information and broadcasting ministry, DTH, IPTV, mobile TV, HITS and teleport require substantial infrastructure augmentation. Foreign investment needs to be encouraged to fill the investment gap for infrastructure being built up. Further, in view of convergence of technologies, broadcast carriage services need to be treated at par with the telecom sector where 74% foreign investment is permissible with the provision that foreign investment beyond 49% would require FIPB approval, the I&B ministry is said to have told DIPP.

The move is in line with the proposed mandatory digitisation of 100-million-plus analogue cable homes in the country. According to a recent report by Media Partners Asia, digitisation will require around $6 billion worth of investment with $300 million alone required to meet the capex and other financial needs for digitisation of 3.5 million analogue cable homes in the four metros.

The hike in FDI cap will be crucial for the cash-strapped six-player DTH market, which is scouting for funds to meet respective expansion needs. Currently, the foreign investment cap for DTH is 49% but within that, FDI cannot be more than 20%. A similar cap is also applicable for MSOs and cable operators. However, there is no FDI policy for mobile TV. Now, all these platforms will attract up to 74% foreign investments.

However, for private FM radio, the DIPP has supported a 26% foreign investment cap for the third-phase expansion where news and current affairs content will be allowed. The FM-III policy envisages the setting up of 839 FM stations across 280 towns. For non-news content services like general entertainment, movies and other such genres, the foreign investment cap will remain untouched at 100% with no FIPB approval, sources said.