Go Catch A Falling Star

IT'S Subhash Chandra's word against that of the rest of the industry. The Zee Telefilms Limited (ZTL) chairman's attempt to scotch the "rumour" that his satellite TV venture is on the verge of absorbing a part of the Star TV network has been as emphatic as the speculation over his recent pow-wows with global media mogul Rupert Murdoch in NewsCorp's Los Angeles headquarters has been frenetic. But Chandra's rejoinder, vehement as it is, seems to have convinced few media watchers. The Murdoch-Chandra negotiations, they insist, have entered a decisive stage: the mega-merger is only a matter of time.

 "The merger is definitely round the corner," says Siddhartha Ray, managing director of the SPA Group and Star TV's former India chief. "Virtually everything Star TV's Indian bosses have done in the last three years has been a disaster." An alliance with ZTL, argues Ray, is the only way out for Murdoch, who's believed to be losing $80 million annually in running Star TV. "Murdoch has little choice," feels software producer Ramesh Sharma. "His survival in this region hinges on Chandra." The merger, he says, would be a wise step for Murdoch and a huge psychological victory for ZTL. The latter made a net profit of Rs 45 crore in 1997-1998 and, despite the slump in the domestic market, has posted impressive first-quarter results this year: a 45 per cent increase in profit and a 36 per cent rise in ad sales. "My gut feeling is that they've already signed the deal and are waiting for an opportune moment to spring it on the world," says Rakesh Datta, a south Delhi cable operator and general secretary of the Cable Networks Association.

Still need confirmation from the horse's mouth? Well, Star India CEO Rathikant Basu has been incommunicado since the deal-of-the-decade story erupted. It's being indicated that Basu, hired by Murdoch in late '96 for Rs 4.5 crore a year, will have to make way for ZTL's CEO Vijay Jindal at the head of the new $2 billion company. It was Murdoch's Mumbai mandarin himself who first let on, during an early July meeting of NewsCorp executives, that talks were under way for a strategic alliance with ZTL under the umbrella of Asia Today Ltd (ATL), the Hong Kong-based 50:50 Murdoch-Cha-ndra joint venture that operates the Zee network channels and Siticable, ZTL's ground distribution subsidiary. Basu announced that the alliance would lead to ATL being listed on the New York Stock Exchange.

The announcement expectedly triggered a flurry of press reports suggesting that a huge monopolistic arrangement was on the anvil with three of Murdoch's Asian channels (Star Plus, Star News, Star Movies) slated to join the same corporate platform as the Zee JITENDER GUPTA channels—Zee TV, Zee India TV and Zee Cinema. More importantly, the reports asserted that under the deal, Chandra would acquire management control of the new set-up. All hogwash, says P.C. Lahiri, vice-president, ZTL. "The rumour was started by a business daily and was then picked up by others. The reports were wildly speculative."

The Chandra denial is categorical: "Zee network will continue to function as a distinct business in the manner it has functioned so far—in competition with Star and other channels in one area; with cooperation in another, given the fact that Star also has a stake in Zee network." Why then are media-watchers so sceptical about the ZTL chairman's three-page denial? Elementary. It's felt Chandra is trying to hide something.

In fact, the initial media speculation is believed to have been fuelled by Zee executives themselves to vindicate their contention that Star was a sinking ship in desperate need of a Zee TV rescue act. But when the kite-flying threatened to spin out of control and antagonise ZTL's shareholders, besides alerting the government and satellite TV rivals about the merger plans, the Zee chairman had to issue a denial. Unfortunately for Chandra, those in the know already know far too much. Buried deep down in his signed statement are clear pointers to the future: "The creation of a digital pay market in India requires sig-nificant resources in terms of human capital and investment.... If the future so requires that an alliance of any kind, either in the market or distribution or otherwise, would provide better value to the shareholders and the viewers, I shall not be averse to it."

THE Star-Zee gameplan, say Ramesh Sharma and Siddhartha Ray, is pretty simple. While the Murdoch-controlled $30 billion NewsCorp brings in the liquid cash Chandra needs for his expansion plans, which include an ambitious satellite telecommunications project into which he has already sunk $30 million, the latter will activate his political contacts to open doors for the NewsCorp chairman, whose last hope in India rests squarely on his long-delayed direct-to-home (DTH) project. Murdoch is estimated to have invested a whopping $200 million in the still-born ISkyB and there is no sign yet of his pet project being kickstarted. Says Sharma: "Basu can at best be an administrator. Murdoch needs a high-level operator with contacts with politicians who matter." Nobody in India fits the bill better than Chandra.

Murdoch will bank on Chandra's legendary lobbying skills to make the transition from a free-to-air scenario to a pay TV operation. "Murdoch is essentially a pay TV operator," says Ray. "In the West, his business tactic revolves around the creation of a product monopoly for which subscribers are compelled to pay. Having realised the Indian market won't accept digital encryption as willingly in the immediate future, he has decided to restructure." This move is of a piece with his worldwide strategy: Murdoch is spinning off his businesses all over the globe. "It's clear he doesn't want to keep supporting a loss-making enterprise," says Sharma.

If the merger does happen, it'll create a media monopoly of the kind India has never seen. And it'll make Chandra India's undisputed media czar. That is worrying his rivals. If Murdoch and Chandra, who is valued at $450 million, join forces, they will gain control of 90 per cent of the Indian cable market. "Cable operators will become extinct," says Datta, who belongs to a dwindling tribe—that of independent ground distributors. "There's bound to be concern about Star-Zee's combined financial resources," says Ray.

But not everybody is alarmed by the prospect of a new behemoth emerging on the Indian media scene. Says Amit Khanna of Plus Channel: "As a content provider, I have nothing to worry. You must realise that most people in this industry are software producers." Khanna feels that any merger or restructuring will take place only after it is known what the ground rules are. So, everything will depend on the Broadcast Bill. "Until then, it won't make sense for any concrete arrangement to be worked out," says Khanna. If the Broadcast Bill allows it, Murdoch would like to be the gatekeeper of India's satellite TV business. Chandra has the keys. So, whether the rest of India likes it or not, a marriage of convenience is almost inevitable for the warring partners.