Zee Telefilms is considering a preferential allotment up to 10% of its equity to a foreign strategic partner. The company also has plans to acquire related media businesses.
Zee (FY99 turnover: Rs 2.3 bn) is India's largest private sector (satellite) Television (TV) network. The company beams a portfolio of 7 channels to more than 75 countries. It produces and supplies software (TV programmes) to Hong Kong based Asia Today Limited (promoted by Star TV and Essel Group) on a cost plus pricing basis. Zee owns Siti Cable -India's largest cable network (15% market share) with a presence in 43 cities and a subscriber base of 3.5 m homes. The company has also promoted Zee Music, Zee Education (ZED), and ZED Institute of Creative Arts (ZICA). It recently merged Zee Multimedia Worldwide (ZMW), which owns and operates TV channels in Europe, USA and Africa.
Entering into a strategic partnership with a global media player will benefit the company in a number of ways. Zee will get access to the latest technology, which will help it in improving the quality of its transmission. Apart from this, access to large financial resources and the strategic partner's media assets will help Zee in achieving its goal of providing a complete bouquet of channels to its viewers. The strategic partner will fill the void created after the souring of the relations with Rupert Murdoch's Star Group. A foreign media group would also help the company in its global ambitions.
However concerns remain. It is not as yet certain whether the Star Group, which has an agreement with Zee, would not object to the entry of another foreign media player. In case it objects, then it is likely that the process could be delayed till Zee and Star sort their differences.
The stock is rated as a ‘long term buy’ by analysts based on the company’s position as a leading player in the TV market and strong earnings potential. Analysts are also of the view that, the company can become a Internet service provider (ISP) as it has a well established cable network through its associate company ‘Siti Cable’. The proposed divestment of stake to foreign strategic partner will also be viewed favourably by the market.
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