Mukesh Ambani's RIL eyes controlling stakes in Hathway, DEN Network to push JioGigaFiber rollout

Mukesh Ambani has already set the ball rolling for his next disruption in the broadband market as well as the cable TV and direct-to-home market with the launch of JioGigaFiber, which aims to connect 50 million homes across India. Now, in order to speed up the rollout, he is in the process of stitching up deals with two of India's largest cable TV and broadband service providers.

Citing key people with direct knowledge of the development, The Economic Times reported that Reliance Industries may soon buy controlling stakes -- possibly more than 25% -- in both Hathway Cable & Datacom and DEN Networks. This would give RIL the ability to control developments and get a seat on the the two boards. The deal is expected to be announced in the next few days.

The sources added that promoter stakes in both firms are likely to drop as a result with the acquisition, also triggering open offers. Hathway Cable is owned by the Raheja Group while Sameer Manchanda owns DEN Networks. Both these companies have informed the stock exchanges that their respective boards are meeting on October 17 to discuss and approve a proposal for raising funds.

"Both Hathway and DEN will issue fresh shares. The fine print of the deal is being worked out," said a source, adding, "It will be a significant stake, but less than 50 per cent." Given that these two operators boast 7.2 million digital cable subscribers each, with operations across 350 and 200 cities, respectively, buying stakes in them will give a major boost to Jio's plans. Moreover, Hathway  has cornered over 52% of the country's total cable broadband market in India and has the ability to reach 5.5 million homes. DEN has the ability to reach 0.97 million homes.

"RIL continues to look at various business plans at any given point of time. But the past two months have been crazy and totally under the radar. The plans are ready on how to use existing infrastructure of MSOs [multiple system operators] to give both video and broadband services," said another source.

Although some industry experts expect the deals to come under the Competition Commission of India's (CCI) scanner, the sources cited above don't foresee any trouble. "There is no or very less overlap in the two cable markets. While DEN is strong in Uttar Pradesh and north India, Hathway is strong in central and western India. Also, with five DTH players, none of the operators is in a dominant position in any market, so there is no question of monopoly," said one, explaining why CCI permission won't pose a hurdle.

Interestingly, RIL's  step-down subsidiary, Reliance Jio Media, which owns a pan-India cable licence, already boast links with both companies JioGigaFiber hopes to leverage. The subsidiary had roped in K. Jayaraman, who had led Hathway, and SN Sharma, then the CEO of DEN Networks, to build its cable business. While Jayaraman continues to be with Reliance Jio, Sharma has since moved back to DEN.

The buzz around the stake purchase deals have sent the share prices of Hathway and DEN climbing. The former closed at Rs 28.95 per share, up 6% on the BSE since the beginning of the month, while DEN shares closed at Rs 75.65, up 10.84%.

Edited by Sushmita Choudhury Agarwal