NEW DELHI: The government has liberalised the broadcast sector ahead of India‘s shift to digital carriage of television channels, raising foreign direct investment (FDI) ceiling to 74 per cent from 49 per cent in direct-to home (DTH) and multi-system operators (MSOs).

The government has also lifted the cap on FDI limit to 74 per cent in teleports and hubs set up for uplinking of television channels. It has, however, left untouched FM radio and TV news channels where the cap is at 26 per cent. The FDI limit in case of Headend-In-The Sky (HITS) is 74 per cent.

These decisions were taken at a meeting of the Cabinet Committee on Economic Affairs (CCEA), just ahead of the 31 October 2012 deadline for change over to digital delivery of television channels in Mumbai, Delhi, Chennai and Kolkata.
 
 
Multi-system cable network operators and the DTH sector will find the capital raising climate improve drastically at a time when they require huge doses of capital to fund their digital growth. Cable and DTH companies will require an investment of aound Rs 250 billion to fund digitisation in the country.

“The recent decision on FDI will help fund the digitisation process in India. It will also fuel broadband investments and cable companies can look at it as a good growth engine,” says Den Networks chief operating officer M G Azhar.

In the DTH sector, News Corp can look at upping its stake in Tata Sky, the joint venture company where Tata Sons is the majority partner.

Broadcasting sector to be treated at par with Telecom

The CCEA also decided to rationalise the methodology of calculation of foreign direct investment and the methodology, as applicable to the telecom sector, would also be made applicable across the lnformation and Broadcasting sector. For companies operating in the broadcasting sector, however, the foreign investment (FI) limits for different activities include different components.

Accordingly, as in the case of the telecommunications sector, the foreign investment limit in companies engaged in various activities of the I&B sector shall include, in addition to FDI, investment by Foreign Institutional Investors (FIIs), Non Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entities.
 
 
Uniformity in carriage services for Broadcasting, Telecom

Since it is possible to provide broadcasting `carriage services” using either telecommunication networks or broadcasting networks, uniformity has been proposed in respect of companies providing carriage services (except cable services). For the same reason, uniformity is necessary in the method of calculation of direct foreign investment, in
companies operating in the telecom and broadcasting sectors.

No changes in other sectors of broadcasting

However, the government decided not to change the present limit for head-end-in-the sky broadcasting service of 74 per cent foreign investment.

It also said the limit of 49 per cent under the automatic route will continue for cable networks or MSOs not undertaking up-gradation of networks towards digitisation and addressability.

Similarly, there will be no change in the existing limit for uplinking ‘News & Current Affairs’ TV channels / FM Radio or Non-‘News & Current Affairs’ TV Channels / Down-linking of TV Channels. The existing limit is 26 per cent foreign investment under the government approval route.

FDI fixed for Mobile TV

Similarly, it was decided that FDI in mobile television, for which there was no specific dispensation, will be permitted up to 74 per cent.

FDI up to 49 per cent in all these services will be under the automatic route and for stakes beyond that, approval of Foreign Investment Promotion Board (FIPB) will be required.

Enhanced access to foreign investment is expected to expand the reach of broadcasting services, thereby improving accessibility of these services, and bring in international best practices. The proposal will make the foreign investment policy for the broadcasting sector consistent with that of the telecom sector, because of the convergence of technologies involved in these two sectors, and thereby bring in greater investments into quality infrastructure for the broadcasting carriage services.

The changes are in keeping with recommendations made by the Telecom Regulatory Authority of India.

Acceptance of long-standing demand

This is in acceptance of a long-standing demand by stakeholders and even the Telecom Regulatory Authority of India (Trai) and Parliamentary Committees which saw no reason for discrimination between broadcasting and telecom sectors in the age of convergence.

Foreign investment in companies engaged in these services will be subject to sectoral and security conditionalities and guidelines, as may be specified from time to time, by the concerned Ministries.

Trai had earlier recommended different foreign investment limits for companies engaged in providing `carriage` and `content` services. It had also stressed the need for a holistic review of the extant Foreign Investment limits for companies operating in different segments of the broadcasting sector, in order to bring about consistency in the policy, as also to promote a level playing field between competing technologies, in view of the convergence of technologies across the telecommunication and broadcasting sectors.