In a move that signals the emergence of industrialist Mukesh Ambani as a media mogul, Reliance Industries Ltd (RIL) has acquired a controlling stake in Network18. The announcement came on 28th May when the Board of Reliance industries approved funding of Rs. 4000 crore to Independent Media Trust (IMT), of which RIL is the sole beneficiary for taking over Network 18. IMT would use the funds to acquire control over Network18 and TV 18, resulting in ownership of about 78% in Network18 and 9 per cent in TV18, and to acquire shares tendered in the open offer.
The acquisition is the latest move in Ambani’s strategy to establish a wide spread presence across media segment since finalizing an alliance with Networks 18 group in 2012. This is not the first time when Reliance has entered in Media industry, earlier during the tenure of group founder Dhirubhai Ambani, the Reliance group had bought “Sunday Observer”. Later, in 1991, it had launched a sister publication, “The Business & Political Observer”. However, both the ventures did not succeed well. The acquisition comes even as RIL’s telecom service unit Reliance Infocom gears up for 4G rollout. The company had earlier signed five tower sharing agreements is readying for launch by the year-end.
In the run-up to the deal, Network 18 had seen a spate of top level movements in the company. On 28th May, its Chief Executive Officer (CEO) B. Sai Kumar had resigned. This was followed by the resignation of RDS Bawa, the groups CFO. On the very same day Ajay Chacko, the chief operating officer (COO) also resigned. All three were part of the organisation since its formative days. Network18 on 30 May announced that Raghav Bahl and his wife Ritu Kapur had exited their shareholding in the company.
Acquisition to boost 4G business
RIL in its press release said the acquisition would differentiate Reliance’s 4G businesses by providing a unique amalgamation at the intersection of telecom, web and digital commerce. Jio has lately been on a hiring spree. In April 2014, the firm said, its national employee count had grown to over 3,000. “The key leadership positions to execute the (4G) project are in place,” the company said.
RIL is building a futuristic broadband infrastructure to handle the huge demand for data and voice using “long term evolution” or LTE a technology standard for 4G broadband. Jio acquired pan-India airwaves in the 2,300 MHz band four years ago, and now look set to roll out services by September, ahead of the May 2015 deadline. In February 2014, it bought more airwaves in the 1,800 MHz band in 14 regions in a government auction.
So, it owns spectrum in the 2,300 MHz and 1,800 MHz bands and plans to offer both broadband and voice services. In landline too, the company is building up its fiber optic network directly to consumers in100 cities to provide triple play services. The RIL spokesman said the firm has been seriously moving towards securing infrastructure for its telecom business and the acquisition of Network 18 and its subsidiary should be seen as a step towards getting top level content for 4G businesses.
The acquisition of Network 18 gives it control of diversified portfolio that includes news channels, entertainment channels, education channels, e-commerce, publishing and films; a perfect blend for the converged services of the future on its broadband networks. Mukesh fully understands that it is the content that drives the traffic on networks .
Background of Acquisition
The acquisition was in the works for long. Its seeds are said to have been two years ago, when RIL, through IMT, gave a Rs 1,700-crore loan to Raghav Bahl’s investment companies to ensure he retained stakes in Network18 and TV18. The companies had decided to go for an open offer to raise Rs 4,000 crore for retiring debt and buying stakes in regional channels of the Hyderabad-based Eenadu Network. To maintain promoter stake in the company, Bahl needed Rs 1,700 crore, which he got from IMT in the form of optionally-convertible debentures.
The acquisition, was triggered after the debt was converted into equity. As part of the deal, a memorandum of understanding was signed between RIL’s broadband subsidiary, Infotel, and the Network18 Group for ‘preferential’ access to all web and media properties of Bahl’s media network.
Before Bahl bought a stake in Eenadu, Mukesh Ambani had over time invested nearly Rs 2,600 crore to acquire 100 per cent stakes in regional news channels like ETV Uttar Pradesh, ETV Madhya Pradesh, ETV Bihar and ETV Urdu, besides regional entertainment channels like ETV Marathi, ETV Kannada, ETV Bangla, ETV Oriya and ETV Gujarati. He had also aquired a 49 per cent stake each in Telugu channels ETV Telugu and ETV Telugu News. Bahl, in turn, bought 100 per cent stakes in ETV’s regional news channels, 50 per cent in ETV’s regional entertainment channels and 24.5 per cent in the two Telugu channels, through Network18 for Rs 2,000 crore.