ISSN (Online) - 2349-8846 What Future for the Media in India? Reliance Takeover of Network18 PARANJOY GUHA THAKURTA Vol. 49, Issue No. 24, 14 Jun, 2014 Paranjoy Guha Thakurta ([email protected] ) is an independent journalist and educator. India’s largest company now controls India’s largest media conglomerate. India’s media could therefore well be perceived to henceforth be a little less independent or, for that matter, trustworthy. 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 ISSN (Online) - 2349-8846 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 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 ISSN (Online) - 2349-8846 – 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 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 RIL’s 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 ISSN (Online) - 2349-8846 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 companies…Bahl 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.