(5 January 2008 6:00 pm)

MUMBAI: Citigroup Venture Capital International-owned You Telecom India Pvt Ltd has set up a subsidiary company to kick start cable TV operations in India.

You Telecom will hold 49 per cent in the new company, Digital Outsourcing. The balance 51 per cent is being held by Indian shareholders.

The capital restructuring in the cable TV company was essential as the government prescribes a 49 per cent FDI (foreign direct investment) cap in the sector.

In You Telecom India, Citigroup holds 85 per cent stake while Bennett & Coleman Company Ltd (BCCL), the holding company of the Times of India, acquired a five per cent stake last year. The balance 10 per cent is held by the ESOP trust.

Digital Outsourcing is looking at acquiring stake in existing cable networks. As a first step, the company has bought 50 per cent stake in Bangalore-based Digital Infotainment, a small-sized cable network.

"We have acquired a 50 per cent stake in Digital Infotainment. This is our entry into cable TV operations. We are looking at making more such acquisitions," says You Telecom CEO EVS Chakravarthy.

The company will also invest in Headend-In-The-Sky (HITS) and is waiting for the government to come out with the regulations. "we will be investing Rs 1.20 billion in the first phase for setting up the HITS infrastructure," says Chakravarthy.

Citigroup Venture Capital International, which launched a $1.6 billion fund in 2005, acquired 85 per cent stake in the Mumbai-based broadband company from British Gas in 2006.

You Telecom has 170,000 broadband subscribers spread over 12 cities and has invested Rs 4 billion in the business.