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Disruptor aficionado RJio sparks another DTH mega merger

The cut-throat competition between India’s three largest MNOs, sparked by the entry of disruptive 4G-only newcomer Reliance Jio to the market, has spread from mobile price wars to TV.

RJio has stolen market share from its rivals mainly through low cost mobile offers – rising to be the number three player despite a wave of consolidation between the older MNOs. However, it has been using its modern, highly software-driven network to build a digital platform to deliver a wide range of services, to lift its business model out of the thankless environment of ultra-cheap connectivity. Applications for smart home, connected car, banking and health have been launched, among others, but its boldest move has been to invest in home broadband and TV, moving towards a full quad play and the chance to secure a large proportion of a household’s total telecoms and media spend.

It has acquired two cable operators, Hathway and DEN Network, which are active in the direct-to-home (DTH) TV market, threatening the DTH sector with the same disruption it has unleashed in mobile. But the incumbents, notably Airtel, are biting back. Airtel – which lost its number one spot in the mobile market after the merger of Vodafone and Idea Cellular – is a major player in video through its Digital TV subsidiary. That is now reported to be in merger negotiations with Dish TV, owned by Essel Group, the market leader.

That would create a very dominant provider, with 39 million customers and about 61% market share in DTH. That should – like the Vodafone Idea marriage – provide greater protection against RJio disruption by improving margins and efficiencies. It might even be welcomed by the third player in the sector, Tata Sky, which has 27% share of subscribers, on the basis that it would remove one competitor and disadvantage the newcomer.

Subash Chandra, Essel’s chairman, has previously indicated he might sell some entertainment assets to reduce the group’s debt mountain, reversing his strategy of just a year ago, when Dish TV acquired Videocon DTH to become the market leader. For its part, Airtel was previously keen to exit the DTH space but failed to sell its TV business to Tata Sky. It then sold a 20% stake in Bharti Telemedia, the holding company for Airtel Digital TV, to private equity firm Warburg Pincus for $350m last year.

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