Zee-Sony merger: Will the companies be able to clear CCI hurdle?

While the merger of Zee Entertainment and Sony Pictures Networks India has been announced, questions still remain on how much difficulty it may encounter with the Competition Commission of India (CCI). After all, the potential media behemoth, with a combined revenue of Rs 19,000 crore, will get a huge chunk of broadcasting revenue across geographies.

For the deal to close, there is a window of 90 days and it could very well see other interested bidders – fellow broadcasters, private equity funds or may be a new entrant altogether.

Mahesh Singhi, MD, Singhi Advisors says CCI looks for a 40 per cent share as the point where the monopoly part comes in. “In a business like broadcasting with a multi-lingual complexity, it will not be easy to arrive at a number. On that basis, I think the deal should not face any hurdles.”

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The story is very interesting in terms of broadcasting landscape in the country. Zee, before the financial struggles within the group, thanks to an infrastructure foray, was run by an Indian promoter with a shareholding of over 50 per cent. However, the rest of the players - Star-Disney combined, Viacom (with the Network18 Group) and Sony - have international parentage and very deep pockets.

Zee, which at one point had NewsCorp founder Rupert Murdoch as a key shareholder before an acrimonious exit in 1999, will now again have an international affiliation post the deal with Sony. Barring Sun TV, a leading broadcaster down South run by Kalanithi Maran, the entertainment piece of Indian broadcasting is really down to these players.

Sony was also in the midst of merger discussions last year with Viacom. Sources say valuation was the hurdle before the discussions were called off. Without cricket and any big-ticket acquisition, Sony was a well-run entity, but it needed something to make good the loss of the Indian Premier League (IPL). If the deal had gone through, much of that would have been addressed and it would also have had a potential shot at bagging IPL rights.

Cut to the present, the new scenario has a formidable Zee-Sony combine, which will not just go for IPL rights but also for that of the BCCI (Board of Control for Cricket in India) for all the domestic and international cricket played in India.

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