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Citigroup's You Telecom acquires majority in Scod 18 to have cable presence in Mumbai

By SIBABRATA DAS
Indiantelevision.com Team

(19 April 2008 9:00 pm)

MUMBAI: Citigroup Venture Capital International-owned You Telecom India has acquired a majority stake in Scod 18 Networking, an association of cable TV distributors in Mumbai.

The combined investment plan is Rs 1.2 billion in the first phase which will include subsidy towards digital set-top-boxes, says a source familiar with the development.

You Telecom has acquired the stake through subsidiary company Digital Outsourcing. "The deal is for cable TV operations. The broadband business is outside this," the source adds. You Telecom offers broadband service over 12 cities and has invested Rs 4 billion in the business.

Edelweiss was the sole financial advisor to Scod for the transaction. "You Telecom infused primary capital into Scod 18. It has taken majority stake in Scod 18," the source confirms.

This is the first time in India that a consortium of distributors and operators have got together to start operations as a multi-service operator (MSO) and are being backed by a private equity player. Scod intends to offer cable TV services, digital as well as analogue.

The digital headend has been set up in Andheri east, a suburb in western Mumbai. Agreement with the broadcasters are in place and cable TV service has started since 12 April. The services have started in pockets of Mumbai including Borivalli, Dahisar, Goregaon, Chembur, Vashi and Bhandup. Plans are afoot to offer the services all over Mumbai.

The deal enables You Telecom to have a presence in the lucrative market of Mumbai. Scod was in talks with Digital Entertainment Network (DEN), a cable network set up by Global Broadcast News joint MD Sameer Manchanda as lead promoter and TV18 MD Raghav Bahl as founding partner, but the deal couldn't conclude.

"The cable business in Mumbai could become messy with the entry of new MSOs like Digicable Network (India) and DEN. Now You Telecom has surprised the market by doing a deal with the distributors of the MSOs. Incablenet is the MSO which is immediately hit with the Scod venture but nobody knows how the market will shape up. Everybody is expecting Incablenet, which dominates the Mumbai market, to strike back," says the source.

Digital Outsourcing has already started operations in Bangalore, having acquired 50 per cent stake in Digital Infotainment, a small-sized local cable network.

"If the experiment succeeds, the model will be a template for more such deals with a consortium of distributors. Even last mile operators can get together to tap equity financing from outside and start being an MSO. Alternately, they can do a deal with an MSO. But the risk in such deals is that it involves too many people for collective decisions," says an industry observer.

Among the existing MSOs Hathway Cable & Datacom has been the most aggressive in acquiring cable networks, but it has mainly targeted mid-sized operations. It recently took 51 per cent in Bhaskar Multinet Ltd, the cable TV arm of Dainik Bhaskar Group, and 50 per cent in Gujarat Telelinks.