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Friday, September 20, 2019
Trai’s New Consultation Paper on Broadcast Tariffs Spells Trouble for Industry: Experts

Barely 8 months into new tariff regime, Trai has started a process to review framework; some steps can badly hurt industry, fear broadcasters. “We are heading for chaos,” said a top executive of one of the leading broadcast networks when asked to comment on the latest consultation paper by the Telecom Regulatory Authority of India (Trai). It’s a sentiment that is echoed by many in the broadcasting industry after Trai last Friday initiated a process to review the new regulatory framework for the broadcasting sector.

Trai issued a consultation paper titled ‘Tariff-related issues for broadcasting and cable services’, seeking stakeholders’ responses on 27 questions which covered different aspects related to the new tariff order (NTO), which came into force from February 1, 2019.

The three main issues that Trai has sought to address with the consultation papers are — whether channel bouquets should be allowed; should a cap on discounts within bouquets be reintroduced; and whether the ceiling price of channels in bouquets — ₹19 at presentneeds to be re-examined. World-wide bouquets are a standard feature of the TV industry. Consumers across the world opt for them, rather than pick individual channels as the bouquets are cheaper.

Broadcasters and analysts feel that if Trai intervenes in the first two issues — bouquets and cap on discounts within them — then the consequences will be far reaching and many smaller channels and networks will even face an “existential crisis”.

If Trai disallows broadcasters and distribution platform operators (DPOs) — a term used for cable operators and DTH providers — from assembling bouquets, this will severely impact their business model as many smaller and less popular channels will not get enough audiences and lose reach and thus viewership, resulting in a further drop in advertising revenue. Ultimately, they may have to shut shop.

“I don’t think Trai understands the core of the broadcast business. They seem to have already made up their mind and I will not be surprised if they finish the consultation process and open-house discussions by October-November and come out with the amendments to the NTO by end of the year,” said the head of distribution of a leading TV broadcast network.

Experts feel that Trai may direct all the broadcasters and DPOs to implement changes to the NTO from January next year.

MOVE TO BE CHALLENGED
Introducing an MRP for channels falls under Trai’s charter, but a cap on discounting of bouquets is tricky and the entire process would be a lengthy one with a lot of legal tangles, said Rohit Dokania, Senior VP for Research at IDFC Securities.

“Trai will try and impose a certain discount rate between a la carte and bouquets of channels; however, since the Madras HC has already called out 15% discount imposed through the earlier tariff order as arbitrary, Trai will have to be very sure of what it does,” Dokania said. He added that removing the option of forming bouquets is against the basic principles of doing business.

Most of the broadcasters, Trai has found out, are offering discounts ranging from 40%-54%, while in some cases it is up to 70%.

While Trai believes that the NTO was envisaged as a policy to give power of selection and choice in the hands of end consumers and this kind of discounting is making MRP of individual channels illusory thereby impacting the a la carte choice of channels by consumers, the Madras High court found the 15% cap arbitrary and set it aside.

PRICING IS KEY TO REINVEST
Trai fixed ₹19 as the MRP cap for channels under the NTO. However, it has found that broadcasters have kept all the popular channels – 66 – in the top bracket. These consist mostly of Hindi and regional general entertainment channels and sports channels.

Now, if Trai re-examines the pricing, the channels may lose the power to reinvest in premium content, especially when they are facing tough competition from video streaming services.

“Trai has to stop seeing broadcast and digital sectors in isolation. Can the regulator regulate the pricing of a Hotstar or a Netflix? If not, one has to ask, will regulating the pricing of TV help,” asked Rajiv Sharma, co-head of institutional research at SBICAP Securities. “Recent consultations if enforced may bring down the monthly bill, but TV may lose value. Broadcasters won’t be able to earn enough to invest in quality content and may lose out to OTT.”

Sharma said that going back to issues, which have been decided by courts, sends a wrong message to fresh investments. “For people, who cannot afford premium TV, there is an affordable option of DD FreeDish and Trai should make that more robust,” he said.

Another broadcaster, seemingly referring to the upcoming launch of Jio Fiber, stated, “This move makes sense only from a dual-triple play perspective, where a broadband operator is also giving cable and telephony services. So you take the broadband plan and free channels in the basic pack, and for premium content, you subscribe to OTT, via the same broadband.”

BROADCASTERS WORRIED
All the executives across TV broadcasters and DPOs ET spoke with sounded worried and concerned, and requested anonymity to speak freely as they are first expected to give their responses to the sector regulator.

“Trai started this entire process with the idea that monthly cable and DTH bill will come down as people will select only 15-25 channels, which has not been the case. Contrary to the regulator’s idea, in most cases monthly bills have increased. They have realised that they have created a mess and now blaming the broadcasters and DPOs,” said another top executive of a broadcast business.

If Trai has its way, the broadcast sector will see another disruption in less than a year, and this time may force many smaller and less popular channels and TV networks to shut. The sector has already lost 10-12 million TV subscribers in the last five months (as per various industry estimates) post NTO and industry experts fear that this will kill the sector as distribution revenues will drop significantly at a time when advertising revenues are already under pressure. (Source: Economic Times)


Paytm may create new top management roles; set to hire new CFO soon

Paytm has elevated its CFO and senior vice-president Madhur Deora as president in a newly created role. The Citigroup veteran, who joined the digital payments company in 2016, will now oversee multiple business lines at the Noida-based firm. Deora, a former investment banker, will now be responsible for all of Paytm’s consumer services business, the company said.

ON GROWTH PATH
“We have grown over 20 times in the past three years by creating a payments-led lifestyle and financial services app in our country,” said Vijay Shekhar Sharma, founder and chief executive officer at Paytm.

“The next phase of our journey is to expand our offerings in consumer internet and financial services. As we expand our business, we are promoting Madhur to the role of president. He has been a key partner in this success.”

Deora, who had so far been spearheading all dealmaking at the company, had led Paytm through its multiple financing rounds along with a slew of acquisitions it has completed. One97 Communications, the parent of Paytm, has been in talks to raise a new $1-1.5 billion in fresh capital.

JOB CARD
Verticals like games, movies, travel, deals and content will be headed by Deora and he will be responsible for managing the growth and financials of these businesses, said a Paytm spokesperson.

The spokesperson also said that the company is planning to hire a CFO in place of Deora within the next few weeks.

Further, Paytm also has plans to create new roles at the top of the management and the role of a president is one of them, he said.

Sources pointed out that the latest move will make Deora the second in command in the company after Sharma, whom he will continue to report to. The changes at the top come in the wake of a number of senior executives quitting Paytm and Paytm Mall over the past few months. (Source: Economic Times)

Tech Mahindra sells 73.38% stake in arm to US-based Resolve Systems for $2 mn

Software major Tech Mahindra on Sunday announced the divestment of 73.38 per cent stake in its subsidiary FixStream Networks Inc to US-based Resolve Systems LLC for $2 million (approx Rs 14.22 crore).

“...In terms of the authority delegated by the Board of Directors we wish to inform divestment of 73.38 per cent equity investment held by the company in FixStream Networks Inc, USA, a subsidiary company,” Tech Mahindra said in a BSE filing.

The company said consideration received from this divestment is $2 million for the equity held by the company, subject to necessary adjustments. Tech Mahindra said FixStream Networks Inc reported a revenue of $5.15 million and a loss of $5.19 million in 2018-19.

The transaction is expected to be completed by November 15 this year, subject to receipt of all statutory approvals. (Source: The Hindu BusinessLine)

Infy Sees a Jump in Cloud Services as Co Ties up with Biggies

Partners with Google Cloud, Amazon web services and Microsoft Azure. Infosys is witnessing a jump in cloud-based services as it has partnered with large cloud providers such as Google Cloud, Amazon Web Services and Microsoft Azure to help clients move their applications from traditional IT infrastructure to the cloud.

The Bengaluru-based IT services provider is betting on this growth to drive digital services.

“The expectation from what this unit will do is higher from us than from some of the other service lines and rightfully so,” Narsimha Rao Mannepalli, head of cloud and infrastructure at Infosys, told ET. “This is a space where a lot of IT spend will happen and opportunities will be there.”

Technology researcher Gartner has projected that the market size and growth of the cloud services industry at nearly three time the growth of overall IT services through 2022. In April, it projected the global public cloud service market to grow to $331 billion by 2022 from $182.4 billion in 2018.

Infosys has internally set a target to achieve over 50% of its revenues from the digital services, up from 35.7% in the quarter to June, Company CEO Salil Parekh had recently told ET.

Digital services grew at 41.9% in the quarter to June.

“A lot of that (50% target) is only doable if we continue to do well on the cloud side,” Mannepalli said. “It’s very unlikely that we can achieve any of those if we don’t succeed on the cloud side.”

The company looks to further tap into enterprise contracts by offering infrastructure transformations, helping create new business models and digital experiences, and cloud advisory services, he said. Mannepalli said North America will continue to see highest traction for its services followed by Europe, while aggressive bets in cloud are also being made in the Australia region.

“Infosys already has a thousand odd customers in our client list-...so we always begin with that-…so the cloud revenues will reflect the larger Infosys revenue,” he said. (Source: Economic Times)

IT Fears Impact as US Moves on New H-1B Process

BIG WORRY Indian cos are concerned that the process would favour US tech firms over them. The US has moved a step closer to changing how the H-1B visa issuance process is carried out from next year that would impact Indian IT services firms.

Last week, the Office of Management and Budget said it has completed a review of a proposed regulation from the Department of Homeland Security (DHS) that would mandate employers to register without paying the H-1B visa fees of those employees who they intend to sponsor for H-1B visa permit. A lottery system would shortlist people for the work permit, following which the applications will be acccepted.

Indian companies are concerned that the process of issuing visas would be non-transparent and would favour US technology companies over them. ET reported on August 9, that Indian IT firms have seen higher rejections for their visa applications, as the Trump administration looks at hiring more locals.

The DHS body also did a review of increasing the visa fee, a move once finalised would come into effect by April 2020. The revised fees has not been announced yet.

Once the proposed H-1B registration rule is published in the next few days, US Citizen and Immigration Services (USCIS) will open it for public comment before being finalised. Poorvi Chothani, managing partner at the Mumbaibased immigration law firm Law-Quest, said that USCIS should solicit feedback from interested stakeholders before the electronic registration system is implemented to make sure they roll out a viable and sustainable system.

“It is important that USCIS confirms by mid-September, 2019 whether it intends to mandate use of the electronic registration for the H-1B CAP petitions that will be filed in April 2020 for FY 2021. This is important because a large number of companies begin their H-1B cap filing process as early as August, and no later than January, depending on the industry.” (Source: Economic Times)

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