Tata Play and Airtel Digital TV set to merge

The Tata and Bharti groups are finalising a merger between their direct-to-home (DTH) businesses, Tata Play and Airtel Digital TV, in a move aimed at consolidating their positions amid a shrinking pay-TV market.

According to reports, The merger, set to occur through a share swap, will see Airtel holding a majority stake of 52-55% in the combined entity, while Tata Play shareholders, including Walt Disney, will own 45-48%. The deal is expected to boost Airtel’s non-mobile revenues by supporting its ‘triple play’ strategy, which integrates telecom, broadband, and DTH services.

Tata Play, formerly known as Tata Sky began as a joint venture with Rupert Murdoch’s News Corp, with The Walt Disney Co taking over News Corp's stake following its acquisition of 21st Century Fox in 2019. Airtel Digital TV, operated under Bharti Telemedia Ltd, is a wholly owned subsidiary of Bharti Airtel.

The merger will give Airtel access to Tata Play’s 19 million subscriber homes. The combined entity will have a total of 35 million paid subscribers as of September 2024 and revenue exceeding Rs 7,000 crore in FY24. Tata Play also has 500,000 broadband customers through its subsidiary, Tata Play Broadband.

Both companies are expected to sign a heads of terms agreement shortly, after which due diligence will commence. The operations are valued at roughly Rs 6,000-7,000 crore each. While Airtel’s senior management will likely oversee the merged entity, Tata is seeking two board seats.

The deal follows a decade after the Dish TV-Videocon d2h merger and aligns with broader industry shifts, including Reliance Industries and Walt Disney merging Star India and Viacom18 to form JioStar. The pay-TV market has contracted, with subscribers falling from 120 million to 84 million homes in recent years, further pressured by competition from video streaming platforms and the free DTH service DD Free Dish.

According to a September 2024 TRAI report, pay DTH subscribers dropped to 60 million, down from 70 million in FY21. Analysts suggest Airtel aims to convert Tata Play’s top 5 million DTH subscribers into broadband customers to increase average revenue per user (ARPU).

The merger also brings regulatory challenges. Bharti Telemedia faces a potential liability of Rs 5,580 crore related to disputed licence fees, with provisions of approximately Rs 3,426 crore made as of March 31, 2024. Tata Play has received a consolidated licence fee demand of Rs 3,628 crore, including Rs 1,401.66 crore in interest.

Despite the decline of the pay-TV sector, the merged entity is poised to be the largest player in India’s pay-TV market, leveraging bundled services to drive growth.