Why Indian Politicians Buy Cable Operations
30 April 2016 By Vibodh Parthasarathi and Alam Srinivas
India’s cable industry is a buoyant market. Much of that is in the hands of local politicians who use cable companies to reach their constituencies, stave off unfavorable reporting or to influence regulation. The situation is not at all kosher; but nobody seems to be concerned.
In 2011, an investigative TV documentary on illegal iron ore mining in Bellary, situated north of India’s IT city of Bangalore, Karnataka, was aired by CNN-IBN, a leading English news channel. The documentary was blacked out on local cable networks in seven districts in Karnataka, including Bellary. The cable network in this mining town, called DEN Bellary City Cable, was then partly-owned by Bellary Sreeramulu, former minister in the state government and a business associate of the three Reddy brothers (Karunakara, Janardhana and Somashekara), who owned several mines in the area, besides being ministers in several governments in Karnataka.
DEN Bellary City Cable was part of a series of acquisitions and takeovers initiated by DEN Networks Ltd (DNL) to expand its operations across the country. DEN Bellary became DNL’s subsidiary from 1 January 2009. As on 31 March 2013, it owned 51% of the Bellary cable firm, while Sreeramulu held a sizable 45.5%. Today, DNL has emerged as India’s largest cable operator in terms of subscribers.
In the recent past, there were occasional debates and examples surfacing of risks to public interest by print and TV outlets being owned, or surreptitiously-controlled, by national and local MPs. These risks, often unraveled by investigative journalists or during judicial proceedings are usually abuses of gatekeeping functions, especially bias in reportage and malpractices of news-for-cash.
With politicians and legislatures increasingly investing or owning (directly or indirectly) carriage networks, age-old threats of gatekeeping and filtering have starkly emerged in the distribution segment. The multi-sector communication watchdog, the Telecom Regulatory Authority of India (TRAI), has often, albeit weakly, spotlighted this; in 2014, it recommended barring political ownership in the broadcasting and distribution segments of India’s booming TV business. The Ministry of Information & Broadcasting (MIB), rather characteristically, is yet to accept these proposals.
Cable, a Political Affair
A recent yet-to-be-published study on digital distribution in India sought to unravel the ownership structure of three leading, listed cable companies to test two hypotheses. First, as often assumed, whether political ownership in cable distribution is a widespread phenomenon; and second, whether information on such ownership is adequately and accurately disclosed by proprietors. The latter is of particular concern for listed companies at a time when national and some regional cable firms are moving to the bourse and thus must disclose information to lawmakers, regulators and stock exchanges.
The study found massive political ownership in cable networks, including companies that also provide internet access. These included chief ministers of states, national and state cabinet ministers, local legislatures and former politicians. Such ownership is deeply embedded in the three cable entities canvassed by the study. The companies were: SITI Cable, India’s oldest cable service and an affiliate of the leading, multilingual TV network, Zee Group; Hathway Cable & Datacom, which emerged out of ventures into the press by a real estate group; and DNL, the last major entrant in TV distribution. Information on political involvement was not disclosed accurately in any of their mandatory disclosures, including Initial Public Offering (IPO) documentation, annual reports and filings with the stock exchanges.
Cable distribution in India grew in the footsteps of the TV boom of the 1990s, but, unlike that phenomenon, has remained organizationally fragmented, technologically poor and localized operation-wise. For the most of the last 25 years, growth and expansion has been chaotic with last-mile cable operators (LMOs) sprouting and marking their territories, be it in regional towns or in different pockets of large cities. By 2010, there are over 50,000 LMOs across India, getting their signals from the 5,000-plus Multiple System Operators (MSOs), as large cable networks are known. Off the latter, over the last five years, about 30-odd MSOs emerged as trans-regional, if not nationwide, players. The four largest national MSOs garnered sizable market shares of 8-12% each.
In the early days, laying cable lines in the last-mile to households required links with local elites, police and municipal bodies, and local politicians became useful in facilitating administrative and extra-administrative procedures. Gradually, politicians realized cable offered an effective way to reach out to their constituencies, especially since besides national and international satellite TV channels, cable networks commonly relayed prominent local events and festivals. As the TV distribution business grew, new players emerged and competition heightened, several cities and states witnessed wars between competing operators, frequently involving murders and attempts to murder, to protect their distribution territories. In such cases, explicitly visible alliances and connections with politicians, particularly those in power, were important assets. Finally, and much like in TV broadcasting, large cable operators also entered mainstream electoral politics as much to pursue their commercial interests as to meet their political goals.
However, when cable networks ambitiously started expand to become national MSOs, one of the surest routes was to acquire LMOs. In other words, to become big cable operators, the small ones had to buy other small fish first. But most of the original owners of these small cable companies, who included politicians, wished to retain sizable, albeit minor, stakes in the operations. Thus, large, national MSOs are comprised of dozens of subsidiaries. A majority stake in them, of up to 49%, is often held by local and national politicians.
Be Proud of Your Local Politician
Political ownership in cable is often at the highest levels. For example, Gurdeep Singh, from the northern state of Punjab, is a business associate of Sukhbir Singh Badal, son of the state’s chief minister, Prakash Singh Badal. Mr Gurdeep owned Fastway Transmission, which has nearly 90% of the cable market in Punjab. As of 31 March 2013, he was also 51% owner of Hathway Sukhamrit Cable & Datacom, with the rest held by Hathway Cable & Datacom, India’s second largest cable operator by subscribers.
When DNL expanded into Southern India, it took over an existing cable operator in Kerala owned by PV Ali Mubarak, whose brother Abdul Wahab was a former member of the Upper House of India’s Parliament and is considered the richest politician in Kerala. In the resulting entity, Den Malabar Cable Vision, Mr Mubarak owned in March 2013 just over 12% stake and DNL 51% stake.
In all such circumstances, it is easy to imagine how the involvement of politicians may go beyond just ownership: for instance, to shape or stall cable regulation. In March 2013, Mumbai-based Anil Parab Dattatray of the Shiv Sena, a regional party, held 49% stake in Hathway Dattatray Cable Network, with the remaining 51% held by a national MSO, Hathway Cable. In several interviews, Mr Dattatray claimed that under the guidance of his party’s then boss, the late Balasaheb Thackeray, and as the president of cable operators’ association in Mumbai, he stalled the implementation of the Conditional Access System, mandatorily introduced by TRAI in Mumbai during the early 2000s. The CAS was a key component in the long and messy transition to digital distribution as it encrypts signal to allow only paying subscribers to view TV channels.
Proprietors of integrated media conglomerates with interests in the TV business, like the Zee Group, have also involved politicians as partners in several ventures. As of March 2013, Satyanarayana Botcha, then the head of the state Andhra Pradesh Congress Committee, who also held several ministerial portfolios, had 50% in 24 Ghantalu, a Telugu-language news channel, from the Zee TV network. The Zee Group’s nationwide cable venture, SITI Cable, had a 51% regional subsidiary in Andhra Pradesh, SITI Vision Digital Media. Two of SITI’s minority shareholders were Satish Kumar Botcha and Parvathi Botcha, the brother and sister-in-law respectively of Mr Satyanarayana.
Cable and politics seem to network well together in India. And nobody seems to be bothered by that.
Authors acknowledge research support by Anushi Agarwal, Jaikaran Singh and Devi Leena Bose.