The government is likely to increase the foreign investment cap in direct to home (DTH) television distribution business to 74% from the present 49%.
At present, foreign shareholding in DTH is capped at 49% with a 20% FDI component. According to sources, once the foreign shareholding is raised to 74% it would be composite. This means foreign investment through any other route, including investments by FIIs, NRIs etc, would not be allowed over and above the specified limit.
The move would bring DTH on a par with the cable distribution business, where 74% FDI is allowed, without any retriction on cross media holding. In addition, the government also wants to bring in an uniformity in FDI cap across the sector. Recently, the composite FDI level in telecom sector was raised to 74% against the earlier 49%.
The move would facilitate the flow of foreign funds into the cash-hungry DTH sector. Setting up of a DTH operation costs around Rs 1,500 crore in the first phase, with additional investments in subsequent phases of expansion.
The exercise is part of the government?s exercise to review foreign investment policy across various sectors, including aviation, oil marketing and media. The government is of the view that with many players in the business, this is the right time for relaxing the foreign investment regime, sources said.
At present, there are three major DTH players? Tata Sky, Dish TV and state-owned Doordarshan. In addition, another four?Reliance Communications, Bharti Airtel, Videocon and Sun Direct ?are expected to start operations within the next 18 months.
At present, the total market size for DTH is around 5 million customers with Doordarshan covering the maximum households (3 million). Dish TV follows with about 2 million and Tata Sky boasts of around 800,000 subscribers.
Tata Sky, which is a joint venture between the Tata group and Rupert Murdoch-promoted Star, has 20% FDI. Zee-promoted Dish TV has an in-principle approval for foreign investment from the Foreign Investment Promotion Board and has attracted FII investments.
Mauritius-based South Asia Entertainment Holdings Ltd has 20% FDI in Kalanithi Maran?s Sun Direct worth around $150 million.
The move would also benefit Bharti Airtel, which had applied for a DTH licence earlier this year under its 100% subsidiary, Bharti Telemedia. However, to comply with the regulations, it subsequently reduced its stake in Bharti Telemedia to 40%.