74% FDI in broadcast a game-changer

The government on Friday has raised foreign direct investment (FDI) limit from 49% to 74% in various services of the broadcast sector, except television news channels and FM radio where the existing 26% limit will continue.

The 74% FDI limit will apply to broadcast carriage services providers, including direct-to-home (DTH), head-end in the sky (HITS), multi-service operators (MSOs) and cable TV to bring about uniformity.

Commerce minister Anand Sharma said 49% FDI will continue to be approved through the automatic route. But any FDI beyond 49% up to 74% will be allowed through the government route, thereby requiring a clearance from the Foreign Investment Promotion Board (FIPB).

The higher limit for FDI in broadcast is a welcome step, in the right direction, and much anticipated, said Smita Jha, leader-entertainment and media, PwC India.

“This will help step up the process of digitisation where investments by the cable industry are required. This timely announcement will likely enable the TV distribution industry meet the October 31 deadline for mandatory digitisation in the four metros. Also, uniformity in the 74% FDI limit across sub-sectors like DTH, cable and HITS is a  commendable step, given that we are now in the era of convergence,” said Jha.

Till now, 49% FDI was allowed in the cable TV and DTH segments while it was 74% in HITS,  a satellite multiplex service that provides TV channels for cable operations. Among other segments, 74% FDI was allowed in mobile TV, which is an area of future growth.

Devendra Parulekar, partner, Ernst & Young, said the 74% FDI decision will introduce parity among the three platforms of HITS, DTH and cable TV.

“All these platforms are capital-intensive and only people with deep pockets and a long-term interest are capable of investing. Besides, given the fact that digital addressable system (DAS) is round the corner, a lot of investment needs to go to digitising the existing network, seeding the set-top boxes (STBs) and getting back-end systems and processes up and ready. A lot of action is expected in the coming few months as foreign players have been waiting for long for this policy regime,” said Parulekar.

India is estimated to have about 106 million households with cable and satellite TV. Some 26 million use DTH and 80 million receive feed from cable networks. Industry experts said that digitising these homes would require an overall investment of over $20 billion, a major portion of which can now be raised from foreign investors.

(With inputs from agencies)