Zee Media's 49% stake in 92.7 BIG FM gets it 59 radio channels

NEW DELHI: Zee Media Corporation Limited (ZMCL)’s Board of Directors today approved acquisition of 49 per cent stake in 92.7 BIG FM, the radio broadcasting business of Reliance Broadcast Network Limited (RBNL), part of Anil Ambani-led Reliance ADA group. This will give Zee access to 45 running FM radio channels, apart from 14 other licences.

As per the agreement with ZMCL, which controls Zee group’s news-related businesses, RBNL shall be transferring the 45 operational and 14 new licenses into two special purpose vehicles (SPVs), respectively, along with the assets and liabilities. Zee shall acquire 49 per cent stake in each of these two SPVs named Vrushvik Entertainment Private Limited (VEPL) and Azalia Media Services Private Limited (AMSPL).

ZMCL and Reliance Broadcast shall also have a call/put option to acquire/sell the balance 51 per cent after the lock-in provisions on the permission holder of these licenses expire. As per government regulations, at least 51 per cent shareholding needs to be held by the permission holder for a minimum period of three years from the date the radio channels were operationalized.

RBNL runs one of the largest network of FM radio channels in India, which include 45 operational licenses (issued under Phase II and migrated to Phase III) and 14 new licenses (issued under Phase III). The FM channels are broadcast under the brand 92.7 BIG FM that reaches 45 cities, 1,200 towns and over 200 million people.

The lock-in period for the 45 operational licenses shall expire on 31 March 2018, while the lock-in period for the other 14 licenses are expected to expire around March 2020.

ZMCL COO Rajiv Singh in a statement said, “We are pleased to announce this acquisition, which shall not only be complementary to our current business but accelerate its growth too. We are currently running successfully a bouquet of 11 news and current affair channels and with the addition of 59 radio licenses, we will be reaching out to a much increased audience base and will keep them engaged on different media platforms. This acquisition shall bring about the desired business diversity and will help in achieving the sound financial objectives at an accelerated pace.”

The proposed transaction, which is subject to regulatory approvals, including that from Ministry of Information & Broadcasting (MIB), is expected to close in the first half of calendar year 2017.

Commenting on the divestment of stake, Reliance Capital ED and Group CEO Sam Ghosh said, “We are happy to bring in Zee Media as our partner in the Radio business. This transaction is part of our strategy to reduce exposure in non-core businesses and work towards further reducing debt under Reliance Capital”. 

Why has Zee re-entered the FM radio business (remember it bid for licences in the first round FM radio auctions years back)? 

According to ZMCL, the radio assets become attractive for the following reasons; especially as the Phase III of FM radio expansion has liberal regulations compared to earlier phases: 

- higher penetration leading to economies of scale

- centralized broadcasting (networking) allowed

- radio services in larger number of cities leading to increased advertisement budget allocation

- multiple frequencies in same geography resulting in content differentiation

- varied content such as news, sports, current affairs, sports, etc allowed

- license tenor increased to 15 years from 10 years

Whether the re-entry into radio business bears fruits remains to be seen and will also depend on the condition of the general economic conditions in the country that is currently unsettled a bit because of the government’s move to demonetise currency notes of Rs. 500 and Rs. 1,000 denominations.

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