Sun TV’s Malaysia partner Astro cuts investment

Astro All Asia Networks Plc., the Malaysian partner in Sun Direct—the direct-to-home (DTH) venture of SunTV Network Ltd’s main promoter Kalanithi Maran—has revised downward the price it will pay for its stake in the company.
Astro says it will now pay Rs549 crore for a 20% stake (for 69 million shares), as against the Rs747 crore agreed upon when the original agreement was signed in April. This brings down the estimated enterprise value of Sun Direct to Rs2,745 crore from the earlier Rs3,735 crore.
And, instead of making the entire investment in one go, Astro will initially buy 39.7 million shares of Sun Direct for Rs79.57 each. It will buy the remaining 29.3 million shares between 1 January and 31 July. This essentially means that it is bringing in only 60% of its proposed investment now, and could make the rest of the investment as late as July.
These details are available in documents filed by Astro with the Malaysian Stock Exchange on 24 September, a few days after Sun Direct launched its subscription drive in Tamil Nadu, offering 75 channels for Rs75 per month, with an installation charge of around Rs1,200. The filing also says that both Astro and Maran would be free to enter alliances with other companies in the “same field” other than DTH. It was not immediately clear what “same field” constitutes. This provision was not present in the original agreement between the two companies.
Both Kalanithi Maran, who is also the chairman and managing director of publicly listed Sun TV Network, and Astro All Asia Networks did not respond to a questionnaire sent to them by fax and email.
The market for DTH services in India is projected to increase rapidly over the next few years. Consulting and research firm Media Partners Asia Ltd has estimated that the penetration of pay TV in India will cross 90% by 2015, from the current level of 61%. This is likely to bring 37.6 million households into the market.
Already, Dish TV from the Zee Networks Ltd, and Tata Sky, a joint venture between the Tata Group and Star Network, offer DTH services (so does state-owned broadcaster Prasar Bharati, but it offers free channels). Currently, there are around three million DTH subscribers between the two companies. Apart from Sun, Reliance—Anil Dhirubhai Ambani Group and the Bharti Group have got licences to launch DTH service in India.
While the rupee’s appreciation from Rs45 to the dollar to Rs40 could explain why Astro’s investment, in rupee terms, has come down, it still does not account for the extent of the reduction.
However, the new agreement between the two partners retains the clause by which Astro can provide financial assistance of up to Rs242 crore, or $54 million, to Sun Direct.
Kalanithi Maran and his wife, Kavery Maran, will subscribe to around 126 million shares paying Rs126 crore, a price of Rs10 per share, while Astro’s investment, even after the downward revision would be at Rs79.57 per share. The Marans had originally invested Rs150 crore for 150 million shares in February 2005. The total number of paid up shares in Sun Direct is 345 million.