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Zee Buildout Extends Into Radio

Two deals announced within hours of each other bring an end to this year’s on-off dance between Zee and Reliance Group, while showcasing the different paths the companies are following.

Anil Ambani’s Reliance Group – in stark contrast to Mukesh Ambani-run Reliance Industries – is moving closer to an exit from the media race.

Zee, meanwhile, is bulwarking its portfolio with promising new properties in radio and TV.

In separate transactions, Zee is taking over India’s largest FM radio network, Big FM, as well as two small TV channels that plug gaps in its existing lineup: Bhojpuri offering Big Ganga and Hindi comedy brand Big Magic.

Together, these assets from Reliance Group are valued at an estimated US$300 million, with radio representing ~90%.

Over the past three years, Zee has moved deeper into the wider media ecosystem, adding music, theater, print and home shopping to its stable.

These extensions can add heft to increasingly large investments in content, distribution and IP.

Now, the broadcaster is getting a presence in domestic radio – and with it a pathway to some of the ~35% of Indian homes outside TV’s reach.

Tuning Into Radio

Zee is taking an initial 49% stake in Big FM, with an option to buy the rest once regulatory lock-in periods expire.

That will kick in from end-March 2018 for Big FM’s 45 operational licenses, and from around March 2020 for 14 licences awarded this year.

Domestically, radio will be housed in specialist news arm, Zee Media.

It looks like a good add-on for Zee, which is also buying a station in the United Arab Emirates, Hum FM, in a move announced September.

Commercial radio has solid growth prospects in India, at least until rural broadband coverage improves in the medium term.

The government auctioned its latest batch of radio licenses in March, triggering a fresh round of expansion.

At the same time, India’s radio sector is a profitable business, where industry margins trend between 30-35%.

That would deliver a nice lift to Zee’s bottom line, as well as a useful marketing platform to promote its content and IP.


Meanwhile, Reliance Group’s loss-making TV channels – the last of what was a larger portfolio (including separate JVs for English-language channels with CBS and RTL) – should find room to grow with Zee’s investment and support.

Current losses can provide tax efficiencies for their new parent in the meantime.

The deal also includes four TV licenses, possibly from Reliance Group’s earlier TV ventures, which may prove useful for further expansion.

India’s next cycle of media competition is taking shape fast, accelerated by Reliance Industries entering the field.

Zee has been getting ready on multiple fronts, steadily strengthening its core media portfolio.

Over the last year or so, company executives also consolidated operations in ad sales, distribution and OTT, supported by India’s dynamic advertising market as well as the group’s buoyant market cap.

Meanwhile, September’s sale of Ten Sports to Sony, for US$385 million in cash, will redirect money and focus to general entertainment, Zee’s wellspring of revenue and profit.

This was recently followed by DTH company Dish TV – under the umbrella of Zee’s parent, Essel Group – bidding to merge with rival satellite operator Videocon d2h.

That would give Essel Group controlled distribution across ~40 million households across DTH and cable, providing a useful backstop for Zee’s own TV ambitions.

The move also paves the way for further M&A by Dish in the future, possibly including Reliance Group’s own DTH platform, Big TV.

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