Television

MBPL moves court to prevent stringent govt. action

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Zee, DTH licence, ASC Enterprises, Subhash Chandra, Siti Cable, Space TV, Dish TVNEW DELHI: Even as Music Broadcast Pvt. Ltd. (MBPL) moved the courts today as a pre-emptive measure against the Indian government taking any stringent action against it on Radio City, the Indian government said that it has received a lengthy reply on the FM radio channel and would study it in "due course."

The same way as Star News had gone to a Mumbai court seeking protection against any disruption of uplinking procedures, PK Mittal's MBPL has sought legal protection from a Mumbai court against government encashing its bank guarantees --- totalling over Rs 400 million in the third year of operation --- without giving it time to explain things.

MBPL is the licence holder for operating private FM radio stations in various cities and has a marketing and content supply agreement with DigiWave, said to a subsidiary of Star India Pvt. Ltd.

However, government officials pointed out that MBPL's request for a meeting before a final decision is taken on the matter would be acceded to.

In its latest reply to the information and broadcasting (I&B) ministry queries on MBPL being just a proxy company for DigiWave, the Mittal company has said that it doesn't have access to statutory information or authority on DigiWave.

The Mittal company has also stated that "adverse report" on MBPL and Radio City is impacting the company's revenues and the moral of the employees.

When contacted by indiantelevision.com a senior executive of DigiWave-MBPL combine said, "The government's queries are fine, but what is affecting us is the trial by the media as it's affecting moral of the employees that is really down."

On a query on MBPL being a proxy company for Star, the former has said that such "outsourcing" is a normal practice globally.

On another query raised by the government on the debt equity ratio being skewed and too high, MBPL, while denying this, has explained that such things are "common practice in greenfield ventures." The government had pointed out that the debt equity ratio of MBPL is 5800:1.

A senior government official today said that the I&B ministry would take some days to take a view on the replies furnished by MBPL.

The information & broadcasting ministry on 12 August had asked MBPL to explain its relationship with the Star India subsidiary DigiWave and how and why the relationship should not be deemed to be flouting the foreign equity restrictions in the FM radio sector.

As per current records, content, ad sales and marketing support for Radio City is Star India's responsibility. The PK Mittal-promoted MBPL is the licence holder while the operational part is with Digiwave, a 50:50 JV between Star and the Ispat group.

According to the Reserve Bank of India (RBI) guidelines only portfolio investments by foreign institutional investors (FIIs) are allowed in the FM radio sector.

The government had further stated that as per Clause 13 of the FM radio licence agreement, a licencee (MBPL) cannot transfer the licence and is responsible for generating the content. If it comes to light that this is not happening the licensor (the government) has the right to cancel the licence.

The government missive to Star also points out that the paid up capital of MBPL being very low, it is rather curious how the operational costs of running an FM channel the size of Radio City is being managed.

The government has also said that since Digiwave has given a loan of Rs 580 million to MBPL, it appears that DigiWave is the company that is solely responsible for running Radio City.

In the light of all this MBPL had been asked to furnish details on which an opinion would be sought from the law ministry and the Department of Company Affairs (DCA) to examine whether the guidelines are being contravened or not.

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