As per reports, Bharti Airtel would merge its DTH subsidiary, Airtel Digital TV, into Tata Play for a share swap agreement. Airtel will retain the majority stake of 52-55%, and the remaining 45-48% will reside with existing shareholders of Tata Play, namely Tata Sons and Walt Disney. This step is another part of Airtel's strategy for further consolidation of broadband and entertainment into a holistic proposition that includes telecom, broadband, and DTH services.

This announcement of a merging event comes on the back of Reliance and Disney's Star India-Viacom18 merger, whose subsequent result formed JioHotStar, the largest media house in India. The transaction will also be the largest consolidation in India's DTH sector since Dish TV announced its merger with Videocon d2h in 2016.

Airtel Digital TV will now have access to 19 million homes and 500,000 broadband subscribers of Tata Play. The combined value will touch 35 million paying customers, with FY24 revenues above ₹7,000 crore. The proposed deal would value both businesses at an estimated ₹6,000-7,000 crore each.

Telecom and TV industry trends

The pay-TV market appears to be in steady decline, as the subscriber base has dropped from around 120 million to 84 million households in recent years. According to the TRAI, the DTH market had 70 million users in FY21 and dropped to 60 million users in FY24. This increase in numbers signals a clear consumer preference shift from traditional pay-TV services.

On the other hand, there is a great opportunity for telecom operators to gain immensely from the ever-increasing demand for OTT content aggregation because they are in a perfectly strategic position to bundle OTT services with their telecom and broadband offerings. DTH is grabbing ever more digital offerings from Tata Play as it adds features to its customer retention and stay competitive.

Bharti Telemedia and Tata Play are wrestling with several regulatory issues. There are pending license fee cases against both companies, with Bharti Telemedia's dues amounting to ₹5,580 crore while those of Tata Play are ₹3,628 crore. Any pending license fee case creates uncertainty over the merger and affects the financial outlook of both entities in general.

Tata Play had a pre-COVID valuation of $3 billion but has dropped to $1 billion since then. It is facing problems such as financial struggles, combined with mounting losses, and lack of IPO plans. Here, the merger with Bharti Airtel becomes vital for Tata Play's rehabilitation and pursuit of growth opportunities.

The due diligence process is set to begin soon with respect to the merger, and if everything goes right, this agreement will transform India's TV and broadband markets. Bringing together the strengths of the two companies will help significantly improve competitiveness in today's rapidly changing media and telecommunications environment by delivering integrated services to expanding consumer bases.