Docstoc

Sector View “Cautious”

Document Sample
Sector View “Cautious” Powered By Docstoc
					India Equity Research | M&E I Institution

Sector Update Competition to intensify

Sector View:
Recommendation of TRAI

“Cautious”

Date:

February 27, 2009

Telecom and broadcast regulator has recommended restrictions on vertical cross-ownership, or common ownership, in broadcasting and distribution in media. Why the recommendation was provided to Ministry of Information and Broadcasting? To ensure that delivery platforms owned by broadcasters don’t block competition /contents from others. Key Highlights of Recommendation • Limit of restriction to increase from Company based to Entity based: “As per the recommendation, ‘entity’ has a broader meaning, which encompasses any person, including an individual, group of persons, public or private body corporate, firm, trust, or any other organization or body as well as ‘inter-connected undertaking’ ”

Size of India Media and Entertainment Industry
1000 900 800
Rs in Billion

911 791 697 584 520 445 386 628

700 600 500 400 300 2005 2006 2007

2008

2009P

2010P

2011P
297 2011P 2012p

Source: FICCI-KPMG, KRC Research

Size of India Advertising Industry
400

Analyst Comment – If TRAI has to PUT restrictions on Crossholding ownership, then it has to take this move because no listed companies in media companies, is having direct ownership into distribution segment, ownership is based on group levels. • Imposed 20% as an Upper Limit: Entity having 20% stake in a broadcasting company should not have over 20% stake in any kind of Distribution Company, such as a multi-system operator (MSO), Cable Company or directto-home (DTH) firm.

341 262

350 300
Rs in Billion

250 200 150 100 50 0 138 165

197

222

238

2008E

2005

2006

2007

2009P

Source: FICCI-KPMG, KRC Research

Analyst Comment – Impact on the stock prices would be minimal as the authority has provided ample time of 3 years to an entity for restructuring their cross- holdings in distribution segment. • No restriction on horizontal expansion: The regulator had allowed media companies to expand horizontally, as there are enough players competing in various segments and “there is no emerging threat of market failure”. Analyst Rohit Maheshwari rohit.maheshwari@krchoksey.com ℡ 91-22-6696 5206 Varun Khanna varun.khanna@krchoksey.com ℡ 91-22-6696 5402 www.krchoksey.com ℡ 91-22-6696 5203 91-22-6691 9569

Analyst Comment – This move was more towards Print and Media companies because current global economic slowdown has severely impacted their advertising revenue than broadcasting companies. Impact Analysis According to the recommendation, players like Essel group (via Dish TV and WWIL), Sun TV group (via Sun Direct in DTH and Sumangali cable Network in cable), Network 18 (via stake in DEN) and Star India (via Tata Sky in DTH and Hathway in cable), which are both TV broadcasters and distributors; have to restructure their holdings in their business within 3 years.

KRC Research is also available on Bloomberg KRCS<GO>, Thomson First Call, Reuters and Factset

2010P

2012p

Sector Update

Impact on broadcasting companies
Short term

We expect marginal impact on the broadcasting companies in the short term front because authority has suggested time of 3 years to an entity for restructuring their cross- holdings. This time frame is sufficient for media companies to realign their business and come out with possible alternatives to protect their market share in broadcasting space by maintaining control over distribution network.
Long term

We expect revival in media companies along with recovery in global economy by 2010, as the advertising spends by corporates would pick up. However, the proposed recommendation would decrease the clout of the existing players and increase the degree of rivalry in the industry. The players like Sun TV can be impacted as it can face competition going forward though at present the barriers to entry are quite high for other players as it is operating through Sun Direct (DTH) and Sumangali cable Network (Cable distribution) Exhibit 1: Presence across Media Space Newspaper Particulars Sun TV Group Essel Group STAR India Network 18 Ushodaya India Today The Times Group HT Media ABP Group Bhaskar Group Jagran Prakashan Sakaal Media Malayala Manorama
Source: Mint, KRC research

Magazines

TV Channels

Cable network

DTH

Web

Film Prod.

FM Radio

Exhibit 2: Groups affected if recommendation is passed by Ministry Newspaper Particulars Sun TV Group Essel Group* STAR India Network 18
Source: Mint, KRC research *Essel group has presence into HITS

Magazines

TV Channels

Cable network

DTH

Web

Film Prod.

FM Radio

Change to be made if recommendation is passed by Ministry
2 KRC Equity Research

Sector Update

Impact on Distribution segment Currently there are only two listed players into this segment: Dish TV (Essel Group holding: 48%) and WWIL (Essel Group holding: 57.94%). If the recommendation is accepted by the Ministry, Essel group’s holding in both these companies would have to come down to 20%. The proposed move would lead to a loss of control of ownership by Essel Group. In such situation we believe the Group can have three alternatives 1. Coming out with alternative holding structure without loosing control over the above entities. 2. Selling the stakes to PE players or strategic investors. 3. Selling the entire stake (which seems distant possibility)

Exhibit 3: Existing Restrictions on Media Companies Particulars Broadcaster MSO/Cable DTH HITS Mobile TV
Source: TRAI, KRC Research NR – No Restriction; R [C] – Restriction of cross holdings by companies; R [E] – Restriction on any entity holding more than 20% across media segments; *recommendations

Broadcaster -NR R[C] R[E]* R[E]*

MSO/Cable NR -R[C] NR NR

DTH R[C] R[C] -R[E]* NR

HITS R[E]* NR R[E]* -NR

Mobile TV R[E]* NR NR NR --

Exhibit 4: Proposed Restrictions on Media Companies Particulars Broadcaster MSO/Cable DTH HITS Mobile TV
Source: TRAI, KRC Research NR – No restriction; R [E] – Restriction on any entity holding more than 20% across media segments;*recommendations; shaded areas indicate changes proposed in current recommendations

Broadcaster -R[E] R[E] R[E]* R[E]*

MSO/Cable R[E] -R[E] NR NR

DTH R[E] R[C] -R[E]* NR

HITS R[E]* NR R[E]* -NR

Mobile TV R[E]* NR NR NR --

3

KRC Equity Research

Sector Update

Rajiv Choksey Anuj Choksey Alok Agarwal

Co-Head Institutional Equities Co-Head Institutional Equities Head Research

rajiv.choksey@krchoksey.com anuj.choksey@krchoksey.com alok.agarwal@krchoksey.com

+91-22-6653 5135 +91-22-6696 5500 +91-22-6696 5502

Other Stocks in the sector under our active coverage: Media and Entertainment
Ticker Summary Company Coverage 4 Recommendation Avg Rating: 4.0 As of Return -29.53% Bmk -12.2% Outper -17.4% BARR

PVRL JAGP SUNTV Z

IN IN IN IN

PVR Ltd Jagran Prakashan Ltd Sun TV Network Ltd Zee Entertainment

BUY BUY BUY Reduce

02/02/09 01/29/09 01/27/09 01/21/09

-53.37% -22.81% -8.40% -19.00%

-42.05% -27.21% 0.24% -26.23%

-11.32% 4.40% -8.64% 7.22%

4th

_________________________________________________________________________________________________________________ Disclaimer: This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, investors are advised to satisfy themselves before making any investments. Kisan Ratilal Choksey Shares & Sec Pvt Ltd., does not bear any responsibility for the authentication of the information contained in the reports and consequently, is not liable for any decisions taken based on the same. Further, KRC Research Reports only provide information updates and analysis. All opinion for buying and selling are available to investors when they are registered clients of KRC Investment Advisory Services. As per SEBI requirements it is stated that, Kisan Ratilal Choksey Shares & Sec Pvt Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or sale thereof while this report is in circulation. _________________________________________________________________________________________________________________ Please send your feedback to krc.research@krchoksey.com Visit us at www.krchoksey.com Kisan Ratilal Choksey Shares and Securities Pvt. Ltd. Registered Office: 1102, Stock Exchange Tower, Dalal Street, Fort, Mumbai – 400 001. Phone: 91-22-6633 5000; Fax: 91-22-6633 8060. Branch Office: ABHISHEK, 5th Floor, Link Road, Dalia Industrial Estate, Andheri (W), Mumbai – 400 058. Phone: 91-22-6696 5555; Fax: 91-22-6691 9576.

4

KRC Equity Research


				
DOCUMENT INFO
Shared By:
Stats:
views:22
posted:1/19/2010
language:English
pages:4
Description: Sector View “Cautious”