Broadcast services sector will benefit from increased FDI

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SummaryThe government’s decision to raise the foreign direct investment ceiling to 74% from 49% in broadcast carriage services will impart a tremendous boost to India’s cable TV sector.

The new norms, coupled with the digitisation drive, have rendered the fast-growing media & entertainment sector in India ripe for foreign participation

The government’s decision to raise the foreign direct investment (FDI) ceiling to 74% from 49% in broadcast carriage services will impart a tremendous boost to India’s cable TV sector. However, more steps are needed to attract the required investment in the sector.

The broadcast services sector comprises direct-to-home (DTH), multi-system operators (MSOs) and cable TV digitisation. With the intention and a clear plan to completely digitise broadcast distribution by 2014, India is the most sought-after market in the world. TV households in India are around 148 million, accounting for over 700 million viewers, and the ongoing digitisation is going to completely change the face of the Indian broadcast industry. The objective is to bring transparency and accountability into the system, which will ultimately reflect in the expansion of the media and entertainment sector and add to the overall economy. In fact, combined with a nascent broadband market, we may expect to create a new service segment beyond entertainment.

An estimated R25,000 crore worth of investments is required by cable operators to digitise 100 million cable homes in the next three years. India’s cable TV infrastructure and ecosystem is set for complete digitisation by the end of December 2014 and four Indian metros (Delhi, Mumbai, Chennai, Kolkata) by October 31, 2012.

Enhancing the limits for FDI is a major step to begin with, helping the opening up of the sector and speeding up the pace of digitisation in the four metros. Building the digital infrastructure and deployment of new technologies too is needed, which necessitates greater participation from overseas operators.

While the fine print on rules set by the Foreign Investment Promotion Board is awaited, the government has brought back confidence among the cable distribution community. Investors would closely watch the first phase execution of cable digitisation and lend support for the remaining phases across the country. We can expect more activity by the next financial year for MSOs to source funds for infrastructure spends.

The immediate beneficiaries will be those MSOs that have obtained licence from the information and broadcasting ministry for digital addressable system (DAS). So far, over 50 MSOs have obtained DAS licences. Already, major MSOs have invested substantially for the first phase cable TV digitisation. The current move to raise the FDI bar will help them with concrete digitisation expansion

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