RIL move on media assets to create cleaner structure

Mumbai (IANS) The move by Reliance Industries Limited (RIL) to aggregate the media assets in Network 18 will create a cleaner structure and is easier to manage with the reduction of listed entities, according to a report by BofA Securities.

RIL announced that it would aggregate the media assets outside the Jio umbrella under one single entity of Network18. The companies to be combined include TV18, Den Networks & Hathway Cable.

From RIL perspective this creates a cleaner structure and is likely easier to manage (as it reduces listed entities), the report said.

Media is small part of RIL's EV but it helps offer bundled products in future and better analyze customer trends, it added.

RIL's shareholding (through Independent Media Trust) in the new entity will fall to around 64 per cent from 75 per cent. The proposed merger creates a media company with Rs 80 billion annual revenue and Rs 120 billion market cap.

The company will have 13 per cent TV market and 6.7 per cent share of wireline users. It will be also be the No 1 cable distributor with 27 million households. Jio's fiber broadband however remains separate under Jio. The report said that subject to receipt of approvals, the management expects the deal to be consummated by Q2FY21.

The note views that the move improves revenue mix but has limited synergies. From RIL's perspective this creates a cleaner structure and is easier to manage (as it reduces listed entities).

"Between content and distribution, we consider distribution to be the more important component for RIL's media business as it generates higher margins and return ratios vs. content which could be aggregated", the report said.

The merger helps improve capital structure as combined entity will be debt free and has balanced mix of subscription (53 per cent) and Ad (47 per cent) in its revenues.

From NW18 perspective, this helps reduce dependence on ads and helps especially in times of slower GDP growth.

The report adds that synergies aren't much except removal of overheads. Also NW18 channels could be included in Den/Hathway packs at lower prices.

"We consider RIL via the combined entity to emerge as one of the dominant entities in the media space and through the merged entity gives an opportunity to invest in the high growth segments," it addd.

Media contributes to 2.1% of RIL's EV and is not a big driver. It however helps RIL improve customer stickiness with potential to offer bundled products in future and better analyze customer trends/segmentation, the report added.

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