Airtel wants a dish

most of you reading this probably own a credit card. those who do, given we are in the middle of the festive season and the great annual sales, probably have a not-insignificant amount in the credit column. so you’re having a rethink about buying that one final big ticket item for 2021. but what if tomorrow your credit card provider said you didn’t have to clear your bill until four years from now and could start over with a clean slate? you’d probably go ahead and get that home theatre system.

something similar is happening with India’s second-largest telecom service provider, Airtel. the government issued four-year moratorium on AGR dues has increased the cash at its disposal, and it’s using it to pursue a buyout of DTH service provider Dish TV.

premium dish

as per the report, Airtel has offered Rs 20/share — a ~16% premium on Dish TV’s market price, to buy the Dish TV promoter group’s 5.93% stake. this is because a successful acquisition would give it nearly half the market share and put it in a dominant position to capitalise on the immense potential for growth in coverage. at present, Tata Sky is the market leader with around 33.3% of the share, followed by Airtel itself at around 25.5%, and Dish TV with around 24%.

Airtel and Dish TV are headed in opposite directions in terms of growth. the former’s DTH business reported a 5% growth in revenue to Rs 3,056.2 crore for FY21 while the latter’s revenue declined 8.6% to Rs 3,249.4 crore in the same period. Airtel also grew its DTH subscribers by 6.6% to a total of 17.2 million users, while Dish TV lost subscribers. this should make Dish TV promoters more inclined towards a sale.

will Yes say yes?

there is, however, one obstacle that Airtel will have to overcome for this deal to go through. that is getting the approval of Dish TV’s largest shareholder, Yes Bank, which owns 25.63% of the company. that could be quite a task as well, given Dish TV’s promoters are at loggerheads with Yes Bank. this is chiefly over Subhash Chandra’s claim that he agreed to merge Dish TV with Videocon D2H after former Yes Bank boss Rana Kapoor threatened to recall a Rs 3,300 crore loan. a Supreme Court verdict on the matter should go some way towards soothing sentiments on both sides.

earlier this year, Airtel bought back a 20% stake in its own DTH business from Warburg Pincus for Rs 3,126 crore, signalling its faith and ambition in the sector. the deal translated to a multiple of 7.6x EV/Ebitda (enterprise value to earnings before interest, taxes, depreciation, and amortization). if it manages to bridge the differences between Dish TV’s main shareholders at the reported price, it will be quite the coup at 1.5x EV/Ebitda.