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What Future for the Media in India?
Vol - XLIX No. 24, June 14, 2014 | Paranjoy Guha Thakurta
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Reliance Takeover of Network18
The decision by Reliance Industries Limited (RIL) to wrest full managerial and editorial control
over the Network18 group was not unexpected given the fact that two and half years ago, RIL,
the country's biggest privately-owned company, had invested heavily in Network18, India's
biggest media organisation after its virtual amalgamation with the Eenadu group. The
country's richest man, Mukesh D Ambani, is now, formally, also India's biggest media baron.
However, what took some by surprise was the speed with which the core team led by the
Network18 group's principal promoter Raghav Bahl quit rather, was ousted within a
fortnight of the declaration of the results of the general elections on 16 May.
Rationale
The Reliance group seeks to explain its decision to take over the Network18 group as a move
driven by synergy since it intends becoming a major participant in the fourth-generation (4G)
high-speed data transfer business, at a time when technological convergence has blurred the
distinction between telecommunications and broadcasting. At the same time, what Reliance
has achieved by becoming the biggest player in India's mass media industry is that it has
enhanced its ability to influence public opinion through the media, thereby also strengthening
its hold over the working of the country's political economy. At present, the Network18 group
is the largest media conglomerate in India, bigger than the Bennett Coleman/Times group and
the STAR group which is part of Rupert Murdoch's media empire.
The consequence of RIL strengthening its association with Network18 is a clear loss of
heterogeneity in the dissemination of information and opinions. Media plurality in a
multicultural country like India will diminish. In particular, the space for providing factual
information as well as expressing views that are not in favour of (or even against the interests
of) India's biggest corporate conglomerate will shrink, not just in the traditional mainstream
media (print, television and radio) but in the new media (internet and mobile telephony). There
is growing concentration of ownership in the country's already-oligopolistic media markets. In
the absence of restrictions on cross-media ownership, these trends will inexorably lead to the
continuing privatisation and "commodification" of information instead of making it more of a
"public good" that could benefit larger sections of society, in particular the underprivileged.
On 30 May, an announcement was made by RIL to the Bombay Stock Exchange that the
company's board of directors had approved an additional investment of Rs 4,000 crore in an
entity named Independent Media Trust (IMT) to acquire the properties of the Network18
group. Within days, those associated with Bahl, including his wife Ritu Kapur, his sister
Vandana Malik and his close confidantes, including chief executive officer B Sai Kumar, chief
operating officer Ajay Chacko and chief financial officer RDS Bawa, had put in their papers.
As Bahl and Ritu Kapur ended their "entrepreneurial leadership", they welcomed Mukesh
Ambani and RIL as the "potential owners of Network18" and assured employees
What Future for the Media in India?
Believe us, the group (Network18) is in terrific hands. Mr Ambani is a visionary and
a truly good human being. And, we have no doubt Network18 will soar into the
cloud under this dispensation. All of you have very good cause to be excited and
optimistic about the future...God bless you and God bless Network18.
Acquisition Process
The story of RIL acquiring control over Network18 began in late 2011. Network18 had a
consolidated debt of nearly Rs 1,400 crore on its books at the end of the year and was looking
for a "white knight" to bail it out. Bahl was not alone in this regard. Promoters of a number of
major media groups, including Aroon Purie (of the Living Media group) and Prannoy Roy (of
New Delhi Television), were desperately looking for investors in the wake of the worldwide
recession and the economic slowdown in India that brought about a squeeze in expenditures
on advertising and marketing services, the proverbial "financial oxygen" of commercially-run
media companies. What compounded the crunch for "traditional" media organisations and
completely disrupted their business models was the rapid spread of the internet that made
(and continues to make) increasingly large volumes of media content almost "free" to those
with a computer and internet connectivity.
It was against this backdrop that in January 2012, RIL announced that it was entering into a
complex, multi-layered financial arrangement that involved selling its interests in the
Hyderabad, Andhra Pradesh-based Eenadu group founded by Ramoji Rao to the Network18
group and also funding the last-named group through a rights issue of shares. Television18
a company in the Network18 group stated that its board of directors had approved an outlay
of up to Rs 2,100 crore for the proposed acquisition of the Eenadu group's television assets
through IMT which would fund the acquisition of shares in Network18 and TV18 through rights
issues. The two entities went on to raise approximately Rs 4,000 crore, including Rs 1,700
crore from its promoters. (For a detailed analysis of this arrangement, see "Corporatisation of
the Media" EPW, 18 February, 2012, by Paranjoy Guha Thakurta and Subi Chaturvedi)
RIL had earlier acknowledged in the High Court of Andhra Pradesh that its investments in
Ushodaya Enterprises, the holding company of the Eenadu group promoted by Ramoji Rao
who is credited with playing an important role in the rise of the late N T Rama Rao as chief
minister of Andhra Pradesh and thereafter, his son-in-law N Chandrababu Naidu. A petition
had been filed in the court by the widow of former Andhra Pradesh chief minister belonging to
the Congress, the late Y S Rajasekhara Reddy, Y S Vijayalakshmi (who was then a member
of the state legislative assembly). The petition had alleged that RIL had bailed out Ramoji Rao
when his family-owned chit fund, Margadarsi, was in trouble and facing various inquiries
(from, among others, the Reserve Bank of India).
Outlook (16 January 2012) suggested: "RIL bailed out ETV (Eenadu TV) after a deal between
Ushodaya and private equity investor Blackstone was scuppered by the then Andhra CM
YSR. Investment banker Nimesh Kampani of JM Financial then pumped in Rs 2,600 crore (he
was hounded by YSR for his efforts). In 2008, ETV was transferred to RIL".
RIL denied these allegations in court. However, its association with the Eenadu group raised
quite a few questions. Financial analysts wondered whether the deal entailed RIL buying back
its own assets, thereby raising issues of corporate governance and incomplete disclosure of
information to shareholders. All these questions and doubts have today been relegated to the
history books. Political equations have changed in the now-bifurcated Andhra Pradesh with
Naidu back in power and RIL taking full control over both the Network18 and the Eenadu
groups.
The January 2012 deal provided for RIL to get preferential access to the content as well as
What Future for the Media in India?
the distribution assets of both media groups. RIL had stated then that Infotel (now a part of
Reliance Jio) was "setting up a pan-India world class fourth generation broadband network
using state-of-the art technologies... to take leadership position in content distribution through
broadband technology through a host of devices". RIL added that it would access digital
content on "entertainment, news, sports, music, weather, education and other genres" from
Network18 and that this was "one of many" partnerships being undertaken by the company.
Even at that time, the Reliance group had sought to assuage apprehensions that RILs
association with Network18 would exert an influence on the latter's editorial policies. Identical
statements issued by both groups stated that funding from RIL would not alter promoter,
management or editorial control of Network18 entities. In its media release, RIL had stated:
"Bahl and his team will continue to have full operational and management control of both
the companiesBahl and the current promoter entities of Network18 and TV18 will continue
to retain control over Network 18 and TV18"
It is now clear that the real boss of the Network18 is no longer Bahl but Mukesh Ambani.
In May 2012, the Competition Commission of India had made it apparent that the zero coupon
optionally convertible debentures issued to facilitate the deal could be converted into equity
shares at any point of time within a period of 10 years which would result in RIL and entities
owned and controlled by it acquiring over 99.9% of the shareholding in companies in the
Network18 group.
Network 18 and Eenadu Empires
The Network18 group owns television channels such as CNBC-TV18, CNN-IBN, CNBC
Awaaz, IBN7, IBN Lokmat and Colors, websites like Moneycontrol.com, Firstpost.com,
In.com, IBNLive.Com, Cricketnext.in, Bookmyshow.com and Homeshop18 (a television cum
internet venture), besides printed magazines such as Forbes India and Overdrive, among
other media and non-media properties. Many of these dominate their respective market
segments, in particular, the segments providing news about shares and other financial
instruments as well as the activities of corporate entities.
Eenadu is the most widely-circulated newspaper in the Telugu language. The Eenadu group
runs both news and general entertainment television channels in Andhra Pradesh, Telengana,
Uttar Pradesh, West Bengal, Maharashtra, Karnataka, Odisha, Gujarat, Madhya Pradesh,
Chhattisgarh, Haryana, Bihar, Jharkhand, Uttarakhand and Himachal Pradesh in various
languages including Telugu, Kannada, Hindi, Bengali, Marathi, Odia, Gujarati and Urdu. (Over
and above the media, the group headed by Ramoji Rao has interests in chit funds, processed
foods, besides the production and distribution of feature films.)
In short, the media conglomerate which is now owned and controlled by the Reliance group
will have its footprint spread not only across the length and breadth of the country, but also
across different genres of news and entertainment. As RIL itself stated in its 30 May official
statement: "The acquisition (of the Network18 group) will differentiate Reliances 4G (fourth-
generation telecommunications and high-speed data transfer) business by providing a unique
amalgamation at the intersection of telecom, web and digital commerce via a suite of premier
digital properties".
Complex Deals in TV18
Over the years, as Bahl expanded his business operations, the journalist in him took a
backseat. (In the interest of transparency, it is being disclosed here that the writer of this
article was employed by the Television18 group as features editor and anchor between
What Future for the Media in India?
October 1995 and March 2001 and thereafter, was a consultant with the group till December
2001.) In more ways than one, his corporate conglomerate started resembling the business
empire founded by the late Dhirubhai Ambani in terms of its structure. Like the Reliance
group, the Network18 group set up dozens of companies, including some in tax havens like
Mauritius, with complicated cross-holdings of shares.
Like the Ambanis, Bahl and his associates struck multi-layered deals that often concealed
more than what was revealed. Closely-held companies were used for this purpose. For
instance, IMT subscribed to debentures in RB Mediasoft Pvt Ltd, RRB Mediasoft Pvt Ltd, RB
Media Holdings Pvt Ltd, Aventure Marketing Pvt Ltd, Watermark Infratech Pvt Ltd and Colorful
Media Pvt Ltd, all of which were controlled by Bahl.
As Rahul Bhatia, who writes for Caravan monthly and who has examined the balance sheets
of Network18 group companies, pointed out in the magazine's website on 3 June:
...the operations and balance sheets of these companies merged and detached
often, allowing the companys management to value assets in ways that were
lawful but nonetheless confounding to outsiders... One feature of these exercises
was the convoluted issuing of equity: a large restructuring in 2011 left small
investors furious, and analysts wondered how the company had allocated debt
during an earnings call.... Other vagaries of accounting were apparent in the
footnotes of the companys public documents. For instance, it acknowledged
hiding losses over Rs 650 crore in a footnote on page 82 of its 2013 annual report,
using a method that, accountants told me, would give them pause...
Bhatia added that certain corporate entities controlled by Bahl loaned large sums to a trust
that purchased Network18s shares in questionable transactions. He wrote:
Capital flowed between his public companies and private companies in tax
havens, disappearing and appearing in the fine print of these companies financial
reports. The transactions his companies undertook were so many, and so
complicated...
Well before the results of the elections were known, Bahl had openly supported Narendra
Modi's candidature as prime minister. In April 2013, the then head of Network18 had
personally anchored a "Think India Dialogue" featuring Modi. On that occasion, the then chief
minister of Gujarat had made a few sarcastic comments about the Planning Commission's
financial support to tiger conservation projects, alluding to Network18's rival group, NDTV.
This is a verbatim account of what Modi said during his public conversation with Bahl:
Planning Commission mein charcha hui, Tiger ke liye 200 crore rupaiye diye,
bharat sarkar ne diye. Shayad woh NDTV usise chalta hai. Mujhe pata nahin..."
(There was a discussion in the Planning Commission on tiger conservation. The
government has allotted Rs 200 crore for this. I don't know if NDTV also runs on
this money.)
Modi then went on to wonder if the Planning Commission thought tigers were secular and
lions (which Gujarat has in sizeable numbers) were communal, to general mirth among those
assembled in the audience. Sources in NDTV have told this writer that its Save the Tiger
campaign on its television channel was sponsored entirely by private companies and no
money was received from any government agency.
After Reliance invested in Network18, the group downsized drastically. In August 2013 alone,
the group summarily sacked over 350 employees in a matter of less than a week. In the past
What Future for the Media in India?
too, the group had asked many of its employees to resign because its expansion plans failed
to fructify. Over the last year or thereabouts, the finances of most companies in the group had
shown distinct signs of improvement, with debt on the decline and profitability on the rise. But
that did not stop Mukesh Ambani from stepping in to take full charge of the media group's
operations with his trusted confidantes.
After the Elections
As the elections were taking place, there was considerable speculation about the future of
certain prominent anchors on television channels owned by the group. When the outcome of
the elections were known on 16 May and it became clear that Modi would become prime
minister and the Aam Aadmi Party (which had publicly criticised Reliance and Mukesh
Ambani) would not have even a handful of MPs in the Lok Sabha, rumours about the
imminent takeover of Network18 intensified. As subsequent events indicated, the speculation
was indeed based on fact.
Was RIL's formal takeover of Network18 a "hostile" one, as certain reports have suggested?
Perhaps, in a strict sense of the term. But many would argue that Bahl should have read the
writing on the wall, that what took place should have been anticipated by him.
As for the Independent Media Trust, its existence is now truly redundant in the new scheme of
things. As an editorial in the thehoot.org website, which tracks the media, put it on 31 May:
"Whoever thought up the name had a delicious sense of irony".
For, from now onwards, a large section of the media in India could well be perceived to be a
little less independent or, for that matter, trustworthy.
Source URL: http://www.epw.in/web-exclusives/what-future-media-india.html
What Future for the Media in India?