Bharti Airtel, under the leadership of Sunil Mittal, is reportedly in advanced discussions to acquire Tata Play, the largest direct-to-home (DTH) service provider in India, which is currently facing financial challenges. This development, reported by The Economic Times, is viewed as a strategic move for Airtel to strengthen its foothold in the digital TV market, which has been experiencing sluggish growth.
The potential acquisition signifies a notable shift for the Tata Group, marking its exit from the content and entertainment sector. This follows the divestiture of its consumer mobility business to Bharti Airtel in 2017, a significant move under the leadership of Tata Sons Chairman N. Chandrasekaran.
The DTH sector is undergoing a transformation, with many consumers in Tier-I and Tier-II cities gravitating towards over-the-top (OTT) streaming services via broadband connections. Meanwhile, rural consumers are opting for more economical choices like Doordarshan’s Free Dish. This evolving consumer behavior has put immense pressure on traditional DTH operators, compelling them to seek new avenues for growth.
Sources indicate that negotiations between Airtel and Tata Group have been progressing for several weeks, and an official announcement regarding the acquisition is anticipated soon. However, Tata Sons has not yet provided a formal statement regarding the potential deal.
Originally known as Tata Sky, Tata Play has faced difficulties maintaining its market position amid changing industry dynamics. A source familiar with the discussions stated, “The group had initially seen strategic value in Tata Play, but market conditions shifted. Tata Play fits more seamlessly into Airtel’s broader strategy of bundled consumer offerings.”
Currently, Tata Sons holds a 70% stake in Tata Play, having recently acquired an additional 10% share from Singapore’s Temasek Holdings for Rs 835 crore ($100 million), which valued Tata Play at $1 billion—significantly lower than its pre-pandemic valuation of $3 billion. Additionally, Walt Disney, which owns the remaining 30%, is also looking to exit the TV distribution sector as part of a broader strategic shift following its merger with 21st Century Fox in 2019.
Industry insiders suggest that Airtel is likely to acquire Tata Play at a valuation comparable to the recent Temasek deal. Tata Play had previously planned to go public and had filed for an initial public offering (IPO) in 2022, but those plans were halted in August.
Since its establishment in 2006, Tata Play has amassed 20.77 million subscribers, capturing a 32.7% market share, according to data from the Telecom Regulatory Authority of India (TRAI) as of March. Airtel Digital TV, which is operated by Bharti Telemedia, holds a 27.8% share, making it the second-largest player in the DTH market.
In the latest quarter, Airtel Digital TV reported 190,000 net additions, marking three consecutive quarters of subscriber growth, which stands in stark contrast to other cash-strapped players in the DTH sector like Dish TV, which holds a 20.8% market share, and Sun TV Direct, with an 18.7% share.
Tata Play also operates a broadband service under the Tata Play Fibre brand, with 480,000 subscribers. In contrast, Airtel has established a strong presence in regions such as southern India, Maharashtra, and West Bengal. Analysts view the acquisition as a crucial step for Airtel to enhance its competitive stance against Reliance Jio’s aggressive content and distribution strategies. “The play here is all about convergence,” an industry expert commented. “Once telcos are inside a customer’s home, they can bundle DTH, broadband, and even IoT services, securing customer loyalty and eventually offering content for free.”
Despite the potential benefits, the acquisition faces significant financial hurdles. Tata Play has reported a consolidated net loss of Rs 353.8 crore in FY24, widening from Rs 105.25 crore in FY23. The DTH segment alone incurred a loss of Rs 247 crore, a stark contrast to the Rs 20 crore profit recorded in FY23. Revenue also fell by 6.1% to Rs 3,982.57 crore.
In comparison, Airtel Digital TV has narrowed its net loss to Rs 76 crore in FY24, down from Rs 349 crore the previous year, with a slight revenue increase to Rs 3,045 crore.
One of the significant operational challenges associated with the merger is the disparity in satellite infrastructure; Airtel utilizes SES, while Tata Play operates on GSAT. Merging these platforms could be expensive and might risk customer churn, as evidenced by Dish TV’s experience during its merger with Videocon d2h, which relied on different satellites.
Furthermore, the telecom industry is currently grappling with substantial pending license fees. Bharti Telemedia potentially faces a liability of Rs 5,580 crore, with Rs 3,426 crore already provisioned. Tata Play has received demand notices totaling Rs 3,628 crore, including Rs 1,401.66 crore in interest. The outcomes of these legal issues could significantly affect the terms of any transaction.
The ongoing consolidation within the pay-TV industry, particularly following Disney’s merger with Reliance-owned Viacom18, has sparked speculation about further mergers and acquisitions. As the DTH market continues to face disruption from OTT platforms, Airtel’s acquisition of Tata Play, if finalized, could mark a transformative moment in the industry, positioning Airtel to better compete against Jio’s rising dominance. The industry is keenly observing the final valuation and the operational integration challenges that lie ahead.