The government is said to have cleared the decks for leading broadcaster Star India to not only increase its stake in direct-to-home (DTH) venture Tata Sky but also pump over Rs 320 crore into the company. This may well be the single-largest investments in the media sector in last one year.
Tata Sky is currently the third-largest DTH operator with over 5 million subscriber base and is looking for investments to take on competition in a six-player, 24 million DTH subscriber market. Tata Sky is a joint venture between Star and Tata Sons. After this move, the stake of Tata group will come down from the current 70% to 50% while that of Star will go up effectively to 30%.
According to sources, this became possible after the Foreign Investment Promotion Board in its last meeting cleared the proposal of Star to form a joint venture company–TS Investments–with the Tata group which in turn will pick up 20% stake in Tata Sky. Post this approval; there will be four shareholders in Tata Sky namely Tata Sons (50%), TS Investments (20%), Baytree Investments Mauritius (10%) and Network Digital Distribution Services (NDDS) of Dubai (20%). While NDDS is a Star group company, TS Investments will have Star as 49% partner with Tata group.
This means the effective holding of Star in Tata Sky will touch 30%, much higher than permissible under the cross-media restrictions for the DTH sector. Star India is also a leading broadcaster operating around a dozen television channels in the country. The current DTH licensing norms state that no broadcaster will hold more than 20% in any DTH company and vice-versa.
