iWorld
OTT, broadband, and ARPU chase
Mumbai: The adoption of streaming in India has happened in stages driven by affordable handsets, cheap data, and most recently the pandemic. While the first two aspects set the stage for global streamers like Amazon Prime Video and Netflix to enter the country, the next few years saw both existing as well as new network and non-network players intensifying the scene.
Despite Netflix’s admittedly ‘frustrated ambitions,’ India continues to be an attractive market for international OTT brands. NBC Universal’s hayu launched last December, AMC+ in March 2022, and the entry of HBO Max is on the cards. The ‘mainstreaming of streaming’ in India, however, depends in a big way on ‘Bharat’ which will power the next wave of OTT adoption through the ‘regional OTT-local ISP/wired broadband’ combine. And now is the time for it.
What changed?
The obvious increase in on-demand content consumption aside, what the pandemic changed at a more fundamental and universal level was that India seems to have reached the point of no return in the context of broadband adoption. Between 2016 and now, broadband has become a utility, and ‘2020’ is to be credited exactly for that.
This also explains why despite the prepaid tariff hike in November 2021 that led to the gross loss in subscriptions, clean up of low paying, dormant users, and movement to postpaid resulted in higher ARPUs (average revenue per user) for telcos across. A look at the past 10 months of Telecom Regulatory Authority of India (Trai) data shows that wired broadband has grown consistently, while mobile and fixed broadband fluctuated.
In fact, the sharp rise of 8.24 per cent last December was reminiscent of the increased demand for wired broadband fuelled by work from home, online education, e-commerce and other digital services, as well as online video during the pandemic. The requirement for cheaper, faster and uninterrupted data, saw wired broadband subscriptions growing by 3.42 per cent post the second wave.
Mutual advantage
The shifting of broadband consumption from offices to homes, mobiles to CTVs and urban to rural is bound to create more regional prospects for VoD content providers, as well as smaller ISPs and MSOs that are struggling to maintain their individual existence. The OTT opportunity has contributed significantly to ensuring that players like OneOTT and ACT that thrive on a strong tier 2-3 play in addition to the metros are counted in the league of Reliance Jio, Bharti Airtel, and Vodafone Idea today.
“We all know that wired broadband is more reliable in terms of speed and quality compared to wireless. But to wire, the whole country is Capex sensitive,” Microscan business head–ISP and director Playbox TV Samson Jesudas says. “The penetration of wired broadband is therefore just about 20 per cent in India. Hence we should appreciate big telcos who are investing huge amounts to wire up the whole country. At the same time, we should ensure the survival of other ISPs in the country.”
Struggling on account of dropping ARPUs as a result of data prices going down, increased customer acquisition cost, high payback of over 12 months, as well as churn issues, ISPs are in greater need than ever to explore other value-added services as revenue options. In such a scenario, OTT can be the catalyst to promote wired broadband.
“Today, all telcos and ISPs are bundling OTT content along with their broadband plans. Cable operators have upgraded themselves to ISPs or franchisees of ISPs. Logistically they are in best position to give quality and timely service to end subscribers,” observes Jesudas. “In fact, there has to be a major consolidation of these LCOs and ISPs by telcos and large ISPs,” Jesudas adds.
In addition to tech and content, partnerships with ISPs are an integral part of ErosSTX’s OTT platform Eros Now’s B2B strategy.
“Today, content makes up for over 82 per cent of internet consumption which also means more consumption of data and increased ARPUs for ISPs. In other words, ISPs have emerged as a medium for consumers to consume more data,” remarks Eros Now senior VP distribution and alliances Manpreet Bumrah. “We work together with ISPs on innovative modulation of engineered subscription plans with a win-all proposition for the entire ecosystem which includes OTT, ISPs and consumers.”
Elaborating on the prospects for MSOs, Bumrah shares that there are over 750 million mobile internet consumers in the country today which establishes the fact that India is riding on the internet. However, only 25 million households have access to wired broadband. “With the cable connected to around 200 million houses, there is a huge opportunity for the entire digital media and entertainment ecosystem to grow at the household level,” he says.
According to Global Infocom Networks partner and director Harshal Dalal, local ISPs are moving ahead from being vanilla broadband service providers to becoming digital service providers today. “Along with OTT which is proving to be a major stepping stone, diversification is being carried out through other offerings such as insurance and travel & tourism,” he notes.
Currently associated with over ten OTT platforms, the Global Infocom Networks has been providing quality and cost-effective solutions to ISPs. It aims to bring more awareness to them in terms of customising their offers and penetrating tier 2 and 3 cities in 2022.
The promise of 100 million ‘TV Nevers’
In a further boost to digital India, the recent budget promised great leaps in rural broadband connectivity through the government’s flagship programme – BharatNet. It aims to bring broadband to 361,000 villages across 16 states, including 1.37 lakh gram panchayats by 2025. The new infra-sharing guidelines are also making it feasible for smaller MSO/ISPs to reach remote areas of the country.
Commenting on the possibility this creates, Bumrah says, “As internet bandwidth improves, the consumer experience will improve which will further accelerate the uptake of the internet in the country including by the 100 million ‘no TV households’.”
According to the economic survey released on 31 January, 5.46 lakh km optical fiber cable (OFC) has been laid as of September 2021, a total of 1.73 lakh gram panchayats (GP) have been connected by OFC, and 1.59 lakh gram panchayats are service ready under BharatNet. Combined with the global push for affordable broadband led by the ITU, BharatNet has the potential to revolutionise the telecom sector much in the same way as Free Dish has transformed the broadcasting industry in recent years.
iWorld
Bill Ackman’s Pershing Square makes $64 billion bid to acquire Universal Music Group
Ackman pitches NYSE relisting plan as UMG board weighs unsolicited offer
The hedge fund has proposed a business combination that values UMG at €30.40 per share, representing a hefty 78 per cent premium to its current trading price. The offer includes €9.4 billion in cash alongside stock in a newly formed entity, with shareholders set to receive €5.05 per share in cash and 0.77 shares in the new company for each UMG share they hold.
Under the proposal, UMG would merge with Pershing Square SPARC Holdings Ltd and re-emerge as a Nevada-based entity listed on the New York Stock Exchange. The move is designed to boost investor visibility and potentially secure inclusion in major indices such as the S&P 500.
Pershing Square Capital Management ceo Bill Ackman argued that while UMG’s operational performance remains strong, its market valuation has lagged due to external factors. “UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business,” Ackman said, pointing to concerns ranging from shareholder overhang to delayed US listing plans.
Ackman also flagged what he sees as untapped potential in UMG’s balance sheet and a lack of clear capital allocation strategy. He added that the market has not fully recognised the value of UMG’s €2.7 billion stake in Spotify, alongside gaps in investor communication.
The proposed transaction would also result in the cancellation of around 17 per cent of UMG’s outstanding shares, while maintaining its investment-grade balance sheet. Pershing Square has said it will fully backstop the equity financing, with debt commitments secured at signing. The deal is targeted for completion by the end of the year.
UMG, however, has struck a measured tone. The company confirmed that its board has received the non-binding proposal and will review it with advisers. It reiterated confidence in its current strategy and leadership under Lucian Grainge, signalling no immediate shift in stance.
The proposal comes at a time when global music companies are navigating evolving investor expectations, streaming economics and capital allocation pressures. For Pershing Square, the bet is clear: sharpen the financial story, relist in the US, and let the music play louder in the markets.
Whether UMG’s board is ready to change the tune remains to be seen, but the spotlight on its valuation just got a lot brighter.
