(22 March 2007 10:30 pm)

MUMBAI: Private equity funds are eyeing investment opportunities into cable networks in India. Citigroup Venture Capital International-owned You Telecom India Pvt Ltd wants to acquire up to 49 per cent stake in a cable TV company.

"We are looking at acquisition opportunities and are in talks with some cable networks but nothing has been finalised yet," says You Telecom CEO EVS Chakravarthy.

You Telecom has recently got approval from the foreign investment promotion board (FIPB) to "make downstream investment up to 49 per cent in an Indian company engaged in the cable network business."

Citigroup had acquired 85 per cent stake in the Mumbai-based broadband company from British Gas in 2006. Bennett & Coleman Company Ltd (BCCL), the holding company of the Times of India, picked up a five per cent stake in You Telecom last month.

You Telecom is exploring opportunities to launch a Headend-In-The-Sky (HITS) platform and recently made a presentation to the Telecom Regulatory Authority of India (Trai) on alternate ways of digitisation. "We see opportunity in the digital cable segment because of conditional access system (Cas). HITS could be an option for us," says Chakravarthy.

You Telecom (earlier Iqara Broadband under British Gas) has pumped in Rs 4 billion towards the broadband business and has 145000 subscribers spread over 11 cities across the country. The company has a turnover of Rs 800 million.

You Telecom (which holds the ISP licence) will be merged into You Broadband Networks India Pvt Ltd (holds IP licence) as part of the restructuring. You Broadband Networks would, thus, become an operating-cum-holding company. "We expect to complete the conversion process in the next 2-4 weeks," says Chakravarthy.

Citigroup Venture Capital International launched a $1.6 billion fund in 2005 to make private equity investments, primarily in companies seeking to profit from the growth in India, Greater China (particularly in the People's Republic of China, Hong Kong and Taiwan) and emerging Europe.

Among the cable companies, Zee Group's Wire & Wireless India Ltd (WWIL) is listed and has expressed intent to rope in a minority investor.

Rajan Raheja-promoted Asianet Satellite Communications, Kerala's largest multi-system operator (MSO), is in talks with US private equity giant Providence for diluting a minority stake but sources say no conclusive agreement has been reached. Raheja also owns Hathway Cable & Datacom where Star Group bought a 26 per cent stake.