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CCI approves RIL’s DEN Network and Hathway Cable acquisitions

The CCI has approved Reliance Industries’ acquisitions of majority stake in DEN Networks and Hathway Cable, via an order dated January 21. RIL can now subscribe to preferential issue of equity shares of DEN and Hathway, and purchase equity share of DEN Networks from existing promoters. The CCI informed MediaNama that a detailed copy of the approval will be released in a few days.

A stock exchange filing (pdf) by DEN Networks shows that Jio Futuristic Digital Holdings Private Limited, Jio Digital Distribution Holdings Private Limited and Jio Television Distribution Holdings Private Limited have received the CCI’s approval for the acquisition.

The acquisition will be carried out via six special purpose vehicles (SPVs) owned and controlled by Digital Media Distribution Trust, of which Reliance Content Distribution Ltd, a subsidiary of RIL, is the is the sole beneficiary.

Meanwhile, RIL has received SEBI’s comments on the open offer to Hathway’s shareholders, and is waiting on the regulator’s comments on the open offer to the shareholders of DEN Networks, GTPL Hathway Ltd, and Hathway Bhawani Cabletel and Datacom Ltd.

The DEN and Hathway acquisitions

  • In October, RIL had announced that it would acquire a majority stake of 66% stake in DEN Networks via an investment of Rs 2045 crore via preference shares and purchase of equity share for Rs 245 crore.
  • It also said it would acquire a 51% stake in Hathway Cable via preference shares for Rs 2940 crore.

Both deals amounted to a consideration of Rs 5230 crore.

RIL will now have access to 27,000 local cable operators who are with DEN Networks and Hathway, and will boost Reliance Jio’s last mile access, hardware and backend infrastructure of the companies. Reliance had said that it would also utilize the deal to expand JioGigaFiber and Jio Smart Home.

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DEN Network financials

Although DEN Network revenues have remained largely constant over the year, the company’s net profit has been falling swiftly: in December 2017 it earned a net profit of Rs 24 lakh, which fell into a loss of Rs 21.92 crore six months later in June 2018. The company faced a loss of Rs 21.5 crore in the quarter ended December 2018.

For the quarter ended December 2018, some highlights:

  • Cable subscription revenue remained stagnant over the last quarter at Rs 172 crore, 7 million billed subscribers
  • Broadband revenue saw a fall of 6% YoY at Rs 17 crore
  • 114,000 cable subscribers

Hathway Cable financials

The company recorded a net profit of Rs 14 crore in September and Rs 23 crore in December 2017. However the company recorded net loss of Rs 2.6 crore in June 2018, which increased to a net loss of Rs 5.9 crore for the quarter ended September 2018.

  • Hathway had 770,000 broadband subscribers, after losing 30,000 subscribers in Q2FY2018. Its broadband revenues remained constant year-on-year in Q2FY2019.
  • Hathway’s ARPU also declined by 5.4% YoY.
  • 7.2 million cable subscribers in the quarter

Both companies were already facing tough competition from Jio: shares of both companies dipped when Reliance announced its home broadband offering, JioGigaFiber.

RIL announced the product in the company’s AGM last July, although it had been in beta-testing beta in a few thousand homes. The company said that the connection speed would be 1Gbps, which is as good as Google Fiber in the US, and ACT Broadband and Spectra’s offering in some Indian cities. The company aimed to have 5 crore fiber connections.

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