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Help Star seals deal to hike stake in Tata Sky to 30%
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#1
Chennai, Nov 26

Star India Holdings, part of Rupert Murdoch's News Corp, has increased its stake in Tata Sky - its direct-to-home joint venture with the Tatas – to 30 per cent from 20 per cent recently, Mr Vikram Kaushik, Managing Director and CEO of Tata Sky, told Business Line.

As FDI in such ventures is capped at 20 per cent (and FIIs are allowed to hold up to 29 per cent), Star India Holdings had approached the Foreign Investment Promotion Board to invest Rs 324 crore to take 49 per cent equity exposure in Tatas' investment arm TS Investments which in turn would acquire a 20 per cent stake in Tata Sky. It got the FIPB clearance in May, and the deal came through recently.

Hence the current holding pattern of the company is Tatas' 50 per cent; Star 20 per cent, TS Investments 20 per cent; and Singapore Government's investment arm Temasek 10 per cent. So, this in effect has diluted the Tatas' direct investment in the venture to 50 per cent (from 70 per cent). And, also enhanced Star's exposure by close to 10 per cent to 30 per cent, though not directly.

According to Mr Kaushik, Tata Sky has so far invested Rs 3,500 crore and going forward would invest further to expand its subscriber base as it is still in the investment phase. (The industry says subscriber acquisition cost is still ruling high. DTH service providers on an average spend at least Rs 4,000 to acquire each subscriber). Tata Sky is expected to invest a similar amount in the next few years.

However, he said as “our ARPU (average revenue per user) is well above the industry average, we are very much on track to make operational breakeven soon”. Average ARPU for the industry could be anywhere from Rs 130-150.Tata Sky has a subscriber base of over six million, and added over a million during the year so far. “The prime factor is that we went for the right kind of subscribers. These subscribers are willing to pay that extra money for better quality, service, equipment and content. We primarily targeted urban areas and not the cable-dark rural market. And, we got predominant share of these customers in large cities who pay more for better quality. And our content line-up has always been geared up in a manner where this subscriber base gets what it looks for,” he elaborated.

Talking about interactive services, he mentioned that Active English is watched by many households. Tata Sky originally thought that it would be teaching children at home. But a market study showed that housewives were more keen on this channel. “There is a sitting market for this product.” This product reaches at least five lakh households currently, he said.

On pay per view movie channels, he said Tata Sky's recent hit was Dabang. On the Tata Sky platform, after its theatre release, two lakh households paid and watched it at home. The movie was priced at Rs 25 per view. “So, the secret behind superior ARPU has been better quality subscribers, quality content line-up and service – from installation to follow up – and our investment in the back-end,” he said.

Source:

http://www.thehindubusinessline.com/2010...820500.htm
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#2
Being in the investment phase and also soon speculation of break-even the Co. standing can be termed overall as good and growing.
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