Airtel in talks to acquire Tata Play
What's the story
Bharti Airtel is reportedly in advanced talks with Tata Group to buy Tata Play, India's top direct-to-home (DTH) business.
The move is part of Airtel's strategy to bolster its position in the digital TV space and boost its non-mobile revenues with bundled offerings.
The potential acquisition comes after a similar deal in 2017 when Bharti bought Tata's consumer mobility business.
Market shift
Tata Play's strategic fit with Airtel's consumer offerings
The digital TV market has witnessed a shift with users in tier 1 and tier 2 cities increasingly opting for over-the-top (OTT) packs on home broadband, instead of DTH services.
Rural subscribers are also moving toward Doordarshan's Free Dish.
An executive close to the development told The Economic Times that while the Tata Group had initially seen strategic value in Tata Play, market dynamics have changed.
Stake distribution
Ownership and potential valuation
Tata Sons now owns a 70% stake in Tata Play, having acquired a 10% stake from Singapore investment firm Temasek Holding Pte in April for ₹835 crore ($100 million).
The deal had valued the company at $1 billion, a far cry from its pre-pandemic valuation of $3 billion.
The remaining 30% of Tata Play is owned by Walt Disney, which has been looking to exit the TV distribution business after merging its media operations with Reliance Jio in India.
Acquisition value
Airtel's potential acquisition could match Temasek deal
Airtel is likely to buy Tata Play at a valuation on par with the Temasek deal.
The original plan was to merge the Tata stakes and take the company public, with IPO documents filed in 2022. However, the plan was shelved by Tata in August.
If successful, this acquisition could help Airtel take on Jio's aggressive offerings and offset vulnerabilities of a standalone player like Tata Play.
Business model
Strategy to offer bundled services
Analysts believe the acquisition could allow Airtel to offer bundled services like wireless or fiber broadband, DTH, and internet of things.
"Once you have locked in a family, you can even offer content for free," said an analyst. The key will be valuation with DTH facing challenges globally, Airtel should get a discount.
Financials
Tata Play's financial performance and Airtel Digital TV's market position
Tata Play's consolidated net loss widened to ₹353.8 crore in FY24 from ₹105.25 crore the last year, as per the Registrar of Companies filings.
The standalone DTH business also posted a loss of ₹247 crore against a net profit of ₹20 crore in FY23.
Meanwhile, Airtel Digital TV's net loss narrowed to ₹76 crore in FY24 from ₹349 crore, with revenue rising marginally to ₹3,045 crore from ₹2,949 crore.