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Nikkei Markets

Reliance Industries' media merger could preview wireless venture

Analysts say the move signals plan to float Reliance Jio IPO

Reliance has spent billions of dollars disrupting India's telecommunications market with its wireless venture Jio.   © Reuters

MUMBAI (NewsRise) -- Reliance Industries' move to consolidate its media and distribution businesses into unit Network18 Media & Investments could be a prelude to billionaire Mukesh Ambani's plan to rope in an investor for the wireless business.

Earlier this week, the company said it will merge its TV18 Broadcast business with Network18, and maintain the cable and broadband businesses of Hathway Cable & Datacom and Den Networks, which it bought in 2018, as separate wholly owned subsidiaries of Network18.

Network18's portfolio includes Nickelodeon, MTV, and CNBC TV18, among others.

The move comes at a time when Ambani is gearing up to create a new digital services company that includes news, music, movies, and app services of Reliance Jio Infocomm, the wireless venture of his flagship Reliance Industries. In October, the oil-to-telecom major said it will pump $15 billion into this venture and turn it debt-free by March.

"Given the reach and scale of our digital ecosystem, we have received strong interest from potential strategic partners," Ambani had then said.

Analysts view the latest merger as a precursor to Ambani's move to court a new investor.

Multiple businesses are being folded into Network18, which will be the sole listed entity and will be 64% owned by Reliance, brokerage CLSA said in a report on Thursday. "We do not see these deals as a media sector consolidation, but as a precursor to a likely initial public offering of Reliance Jio," it added.

A spokesperson for Reliance did not immediately respond to a query.

Earlier, media reports said the move is being planned ahead of Reliance selling a stake in the media business to a global corporation. Bloomberg had reported that Reliance was in talks with Japan's Sony Corp. to sell a stake in the media business, as the Japanese company explores various options including a bid for Network18 or merging its local business with Network18's entertainment channels.

Reliance spent billions of dollars to disrupt India's telecommunication market as it launched its wireless venture Jio more than three years ago, offering free calls and cut-rate data tariffs. The company's aggressive push eroded revenue and profitability of incumbent operators, many of which have since then shut down or merged with larger players.

The aggressive growth over the past three years saw Reliance Jio leapfrogging competition to emerge the leader in wireless operations in India, ahead of rivals Bharti Airtel and Vodafone Idea. It had a revenue market share of 37% at the end of September, according to brokerage IIFL, compared with Bharti Airtel's 32% and Vodafone Idea's 27%.

With leadership in the wireless business under its belt, some experts believe the company's latest move will help it train eyes on the broadband sector.

"The company can easily get 25 to 30 million households into its fold through the direct-to-home fiber broadband unit, which will be a really big kicker for Jio," said S.P. Tulsian, an independent investment advisor. "With content and carriage under one company, Reliance will now be able to better align it with Jio's growth."

--Dhanya Ann Thoppil

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