Sony-Zee may face change in media play worth $10 billion, delay in antitrust review in India
A full-scale antitrust review of Japan’s Sony and Zee Entertainment’s plans to build a $10 billion media powerhouse in India could force concessions and extend the process by months at a crucial moment for the Indian company.
A preliminary Competition Commission of India (CCI) review has flagged concerns, with Reuters reporting that the group will have “unparalleled bargaining power” with Zee’s 92 channels, contributing to Sony’s $86 billion in global revenue. Will be together.
The CCI has called for further investigation, highlighting the impact on competition due to “strong” market conditions, especially in the popular Hindi language segment that the merged entity would have over advertising and channel pricing.
Zee shares fell 6% during trading on Thursday, a day after Reuters reported on CCI’s merger assessment.
Zee did not respond to queries in this article, but has said that it is taking all necessary legal steps to meet the CCI’s approval.
Sony did not respond to Reuters requests for comment.
Former CCI chairman Ashok Chawla told Reuters that such a review could lead to a detailed merger analysis that includes examining various broadcast proposals, delaying approvals.
Four antitrust lawyers told Reuters that such a notice indicated CCI’s deep concern and was likely to force Sony and Zee to reconsider their proposed framework, although none said it would lead to the collapse of the deal. was likely.
Any potential delay, however, comes at a bad time for Zee, a household TV name in India founded in 1992 by Subhash Chandra, known as the “Father of Indian Television”.
The founders of Zee had to reduce their stake in the Indian company in 2019 to deal with their debt levels and Sony’s deal comes amid a 2021 boardroom conflict with a foreign shareholder.
For Sony, the merger will further its ambitions to attract more digital, TV and regional language audiences to the rapidly growing Indian market of 1.4 billion people.
Lawyers said Sony and Zee may have to offer a “structural” measure, which could include selling certain channels, and “practical” measures such as committing that they will not sell prices to advertisers for a certain period. Will increase
“They may have to give up some channels by selling them to third parties. This is CCI’s preferred measure to reduce the risk of competition,” said Shweta Dubey, partner at Indian law firm SD Partners and former CCI executive. M&A Division.
“The entire approval process will now be significantly delayed, and will depend on how pleasant the proposed changes are to the CCI and how the companies interact.”
measure risk
The proposed measures were likely to be “adequate”, a source with direct knowledge of antitrust concerns over the merger plan said without elaborating.
In CCI’s 13-year history, 22 deals had to be modified to gain approval. For example, in 2015, when Indian multiplex giant PVR Ltd sought to acquire a smaller rival’s business, the watchdog raised concerns, forcing it to sell some theaters and not expand into certain areas. blessed Assurance.
The CCI has given Sony and Zee 30 days from August 3 to respond to their notices, but they are yet to submit their response, said a second source with direct knowledge of the process.
Analysts said the combined entity will reshape India’s media and entertainment landscape, heating up competition with Netflix, Amazon and Walt Disney and with Indian billionaire Mukesh Ambani’s Viacom18’s joint venture with Paramount Global.
Media companies are betting big not only on TV channels but also on their video streaming platforms and sports rights.
Zee took another big step this week, inking a licensing deal with Disney to buy some of the cricket TV rights, which IIFL Securities estimates at $1.5 billion.
In a research note, the brokerage said these payments should have been partially funded by the new funds Sony had planned to invest in the merged entity and expressed concern over any antitrust delays.
“The biggest risk… is not getting merged and Zee is troubled by high material cost,” IIFL said.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)