Bharti Airtel is reportedly in advanced negotiations with the Tata Group to acquire Tata Play, India's largest direct-to-home (DTH) service provider, which has been struggling financially. The move aims to strengthen Airtel's presence in the digital TV segment, which faces increasing competition from over-the-top (OTT) streaming services, ET reported citing people aware of the matter.
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Market Dynamics Shifting Towards OTT
If the sale goes through, it will mark Tata's exit from its sub-scale content and entertainment operations. This would be the second significant deal between the two business groups, following Bharti's acquisition of Tata's consumer mobility business in 2017.
Despite Tata Play's market leadership with 20.77 million subscribers and a 32.7 percent market share, it has reported widening losses, with its consolidated net loss reaching Rs 353.8 crore in FY24. Airtel Digital TV, while also posting losses, showed growth with a 27.8 percent market share and improved subscriber additions in recent quarters.
According to the report, Tier 1 and tier 2 users are upgrading to over-the-top (OTT) packs on home broadband instead of DTH and cutting the cord to migrate to cheaper online alternatives while rural subscribers are increasingly opting for Doordarshan's Free Dish.
"The group had bet on the growth of Tata Play and seen strategic value in it until the dynamics of the market changed," the report said quoting an executive close to the development. "The group has been clear that in any market, it has to be in a position of strength and scale. That did not seem to happen as hoped with Tata Play. On the other hand, Tata Play fits well in the strategic plans of Airtel and its portfolio of offerings to consumers."
Reportedly, Tata Play's valuation has dropped significantly, recently pegged at USD 1 billion, down from USD 3 billion pre-pandemic.
Tata Sons currently owns 70 percent of Tata Play after acquiring Singapore's Temasek Holdings' stake in April for Rs 835 crore. Walt Disney holds the remaining 30 percent but has been seeking to exit the TV distribution sector, the report said.
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Strategic Fit for Airtel
While analysts see the acquisition as a strategic fit for Airtel, challenges remain. The companies face pending license fee liabilities—Tata Play has received demand notices totalling Rs 3,628 crore, while Airtel is provisioned for potential liabilities of Rs 5,580 crore.
Additionally, operational issues related to the different satellite technologies used by the companies could complicate integration efforts. For instance, Airtel uses the SES satellite, while Tata Play uses GSAT.
The talks, ongoing for weeks, have gathered momentum and a formal announcement is expected soon. Airtel is expected to buy Tata Play at a valuation similar to that of the Temasek deal, the report said quoting people cited above.
