Television

"WE ARE A CONVERGENCE CORPORATION"- Zee TV Chairman Subhash Chandra

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Last week - more specifically 11 May - was a busy one for Zee Telefilms Ltd (ZTL) chairman Subhash Chandra and his board of directors. He sought shareholder approval for ZTL‘s acquisition of southern network Asianet. At the extraordinary general meeting, he tried to be his usual self: cracking jokes, moving shareholders, playing to the gallery. But it did not help: while he did get the shareholders‘ nod, for the first time, he had them sounding irate whereas earlier they used to lap up every word he uttered like manna from heaven. It almost seemed as if a demi god had fallen from grace. They surrounded him at the end of the meeting - once again, a first - wondering why the shooting scrip had lost its fizz. He hardly got elbow room thanks to the throng.

Chandra moved onto a swanky investment analyst meet in a five-star hotel organised by his company to help revive the ZTL stock‘s sagging fortunes. Here he flashed presentation after presentation and numbers after numbers and drew out in detail his roadmap for ZTL. He took great pains to tell the 200-strong crowd that all was well at Zee and it was bound to only get better. His sales spiel was received with stunted silence. The Indian Cab&Sat Reporter tailed him as he moved around in Mumbai. Excerpts of some Chandraspeak :

Q.HOW WILL ZEE TV‘S DIGITAL PAY TV PLANS EVOLVE?

A.Four Alpha channels are going to go pay in June 2000 along with Zee English, Zee Movies, Nickelodeon, Zee Cinema. By January 2000, Zee News and Music Asia will be added to the bouquet. By July 2001, that is next year, Zee TV, the Hindi channel, will go pay. By March 2002 we will have an 18 channel bouquet, and by December 2002 we will have a 27-channel bouquet. Our goal is to make pay TV revenues account for 20 per cent of our total content revenues by then. We are expecting to launch an Indian health channel targeted at international audiences apart from a business and current affairs channel this year.

Q.WILL YOU ACQUIRE CABLE TV CUSTOMERS THROUGH SITICABLE? AND HOW HAS THE MSO BEEN VALUED AT $2.5 BILLIONS WHEN IT HAS A PROFIT OF ONLY RS 10 MILLION ON A TURNOVER OF RS 590 MILLION?



A.No we will not acquire cable TV customers for Siticable. The valuation of Siticable is high because of the potential. Today we are getting just Rs 3-4 per subscribing customer; this will rise to Rs 240 per home by 2002. The new economy is digital, we have a digital facility for the pay TV market. Through Siticable alone it is five million homes. We can push more channels into homes through this pipe and get paid more for it. Of our Rs 100,000 million turnover in 2005, cable TV will contribute 19 per cent that is Rs 19,000 million. Today, it is barely 2 per cent. The ISP business through cable will throw in another nine per cent (Rs 9,000 million). We are talking about hefty Rs 28,000 million in revenue in one year, which can only go up from there on.

Q.HOW WILL YOU MAKE THE WILD WEST CABLE TV MARKET PAY YOU MORE COMPARED TO TODAY?



A.We won‘t have to do anything. We will graduate our network to HFC and DTO. For each of these segments we require Rs 16,000 million, Rs 3,500 million in investment for the coming year. We will have an HFC network in 26 cities, representing 30 per cent of all cable and satellite homes over the next four years. Once we upgrade, the market itself will be forced to pay. Once Zee TV goes pay there will be immense pressure.

Q.HOW MANY DIGITAL PLATFORMS WILL SUCCEED?



A.I believe only two will succeed. There will be a weak third platform. Individual isolated and single channels will be forced to go on either one of the two platforms. We intend to be one of the two successful platforms.

Q.WILL ZEE GET INTO DTH?



A.According to our plans, we will launch C-band DTH by 2001, follow it up with Ku-band DTH by 2002 if legislation comes in place. The potential according to us is about 3.5 to 4 million homes by 2005 and we intend to capture 50 per cent of that. We need Rs 500 million as investment to prepare for the project this year.

Q.HOW IS ZTL FARING ON THE PROGRAMMING SIDE?



A.We are on a very good wicket. We have recovered the viewership losses we had suffered earlier. Today eight of the Top 10 programmes are Zee TV programmes. Our strategy is to produce programmes that are sasta sundar tikao (cheap, beautiful with long term potential). Our strategy is to contain cost and yet deliver the best product. We want to maximise the returns we can get out of these shows.



Our programme library is today valued in excess of Rs 26,000 million. We will recover our money through syndication.

Q.IS ZTL‘S ADVERTISING/COMMERCIAL INVENTORY IN GOOD FETTLE?



A. We are doing very well. We used to sell our commercial time at an average of Rs 30,000 per 10 seconds earlier; this has gone up to Rs 60,000 now. We are hopeful of doing even better: FMCGs in India have an advertising expenditure of 0.3 per cent of sales. In Europe, companies spend 5 per cent of their sales on advertising or promotion.

So we have a long way to go. This makes me very hopeful that we will go from strength to strength. We expect advertising to grow at 25 per cent per annum. Our market share of advertising will increase from 21 per cent to 32 per cent in 2005. Our Hindi channels will account for 70 per cent of our ad revenue, sports, 20 per cent and other language channels 10 per cent by 2005.

Q.HOW DO YOU VISUALISE THE GROUP IN FUTURE?



A.We are the only Indian company which is close to being called a converged corporation, quite like Time Warner AOL. We will be in a diverse range of activities needed for a convergence venture. We will be a leading entertainment, information and ecommerce company integrated across the value chain from content to consumer.

As I said earlier, ZTL will have a revenue of Rs 100,000 million with a EBITA of Rs 30,000 million by 2005. Broadcasting operations from India will account for 24 per cent of our revenue; broadcasting internationally will bring in 20 per cent. DTH - we visual it being allowed by 2001 - will account for 10 per cent, sports for seven per cent and others for others such as print media, radio etc will pitch in with 11 per cent.

Q.WHAT IS HAPPENING WITH ZTL‘S ADR?



A.With the market in the condition it is in, we are reconsidering the ADR. We will relook whether to got through the ADR route or on the debt side. Or maybe Siticable could do raise the funds through a divestment? Or maybe E-Connect? We will redefine our fund raising options and keep looking at all options.

Q.WHAT‘S THE STATUS OF THE AGRANI (SATELLITE TELEPHONY) PROJECT?



A.Well, the project has a size of $800 million which included both equity and debt. With satellite telephony coming under a cloud, we decided to convert Agrani into a project that takes stakes in other companies. ICO is the first in which Agrani has taken a stake. This has given us the marketing and distribution rights for it for India.

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