Tata Play and Airtel Digital TV in Merger Talks as DTH Sector Battles Streaming Boom

Tata and Bharti groups are in the final stages of merging their loss-making direct-to-home (DTH) businesses, Tata Play and Airtel Digital TV. This comes as Indian consumers cut the cord and switch to digital platforms for video and live streaming.

The merger will be completed through a share swap, and it will help Airtel increase its non-mobile revenues through convergence. More than half of the combined company will be owned by Airtel. The biggest DTH provider in India, Tata Play, was first a joint venture with Rupert Murdoch's News Corp. and was formerly known as Tata Sky. That stake was acquired by Walt Disney Co. in 2019 when it purchased Murdoch's 21st Century Fox.

In keeping with its 'triple play' strategy of integrating telecom, broadband, and DTH services, Airtel will be able to access the 19 million homes owned by Tata Play.

After the Dish TV-Videocon d2h merger in 2016, this deal will be the second significant DTH transaction in roughly ten years. Additionally, JioStar, India's largest media and entertainment company with a revenue of Rs 26,000 crore in FY24, was formed by the merger of Star India and Viacom18 by Reliance Industries and Walt Disney.

Both parties are expected to announce a heads of terms agreement in the coming days, after which due diligence will commence. Following the merger, Airtel is expected to own 52-55% of the combined entity, with Tata Play shareholders, including Walt Disney, owning 45-48%. The company is expected to be run by Airtel senior management, with Tata reportedly seeking two board seats. According to reports, both operations are valued "more or less equally" at between Rs 6,000 and 7,000 crore.

"This will be a non-binding agreement," explained an executive. "However, after months of engagement, both parties should move quickly to resolve all outstanding issues. For Tata, this has been a drag, and like telecom, they are forming an alliance with a group with whom they are comfortable."

Bharti Telemedia Ltd., a fully owned subsidiary of the publicly traded Bharti Airtel, is where Airtel Digital TV is based.

The holding company of the conglomerate, Tata Sons, owns 70% of Tata Play. In April 2024, it paid Rs 835 crore ($100 million) to acquire the 10% stake held by Singaporean investment firm Temasek Holding Pte, valuing the company at $1 billion, or one-third of its $3 billion pre-pandemic valuation. With IPO plans canceled and losses mounting, valuations have fallen even further, according to industry executives.

According to the reports, Disney will retain ownership of shares in the combined entity because other stakeholders are unlikely to buy them out for cash at this time. The US media conglomerate is considering exiting the TV distribution business after reducing its portfolio and merging its media operations with Reliance Jio in India.

As of September 2024, the two entities had a total of 35 million paid subscribers, with FY24 revenue exceeding Rs 7000 crore. Tata Play also serves half a million broadband customers through its subsidiary Tata Play Broadband.