Is Reliance Jio about to acquire Den Networks?

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Reliance Industries refused to deny or confirm media reports about its telecom unit Jio being in talks to acquire cable operator Den Networks.

Shares of Den Networks, one of India’s largest cable networks, are up 6.2%, having opened higher on the news.

“We are unable to comment on media speculation and rumors and it would also be inappropriate on our part to do so,” the company told stock exchanges.

“Our company evaluates various opportunities on an ongoing basis,” it added.

Last week, Den also said it received the nod of National Company Law Tribunal to spin off its broadband business as a wholly owned subsidiary company.

GOOD FIT

It is widely known that many smaller players in the broadband and cable business do not have the staying power required to compete with giants like Reliance Jio and Bharti Airtel, which are expanding their wired services.

Den Networks has not been able to keep pace with competitors like Hathway as far as diversification into the broadband sector has been concerned.

It had broadband subscription revenue of just 21 cr rupees last quarter, out of the total revenue of 313 cr.

Total number of broadband subscribers was only around 2 lakh, compared to 1.1 cr digital cable subscribers, indicating that 98% of its digital cable customers have not yet been converted to its broadband users.

This fits well with the business case of Jio, which is rolling out an advanced cable and broadband service which will allow users to rewind and fast-forward all TV programs on the service.

The Mukesh Ambani-led firm will also be offering fiber-to-the-home connections where possible and cable broadband in other places.

While cable operators like Hathway have converted a substantial chunk of their customers into broadband customers, companies like Den Networks, which are in the early stages, offer a lucrative target for conversion.

However, like most other big cable companies, most of Den’s customers are not ‘owned’ by the company, but by a local partner, which has been an impediment to speedy conversion.

The deal could set the ball rolling in the cable industry in India, one of the most fragmented in the world.

The country has thousands of cable networks, while a country like USA has only a handful.

Besides cable networks, standalone broadband providers such as You Broadband — which was acquired by Vodafone last year — also make for good targets.

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