Jurisdiction - India
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India – ‘We Interrupt This Broadcast’: India Relaxes Broadcasting Sector Foreign Direct Investment Limits.

29 September, 2012

 

Legal News & Analysis – Asia Pacific – India – TMT

 

India is estimated to have about 106 million households with cable and satellite televisions. (Global players can get majority stake in DTH, cable, mobile TV, The Hindu, 14 September 2012.)  New limits, and changes to which routes for approvals apply, in various areas of broadcasting may afford additional opportunities for foreign broadcasting companies, new entrants, investors and lenders, and assist the development of the sector in India.

 

Changes

 

On 20 September 2012, the Department of Industrial Policy and Promotion issued Press Note No. 7 (2012 Series), relating to the review of the policy on foreign investment in companies operating in the broadcasting sector.

 

The limits and routes in respect of companies engaged in providing broadcasting carriage services have been revised, with immediate effect, as follows:

 

  • Direct to home (DTH)
    • new limit of 74% – up from 49% (for foreign direct investment, non-resident Indians and persons of Indian origin) with the foreign direct investment component not exceeding 20%
    • with foreign investment up to 49% now permitted under the Automatic Route and beyond 49% up to 74% under the Government Route – compared with just the Government Route previously
  • Cable Networks (Multiple Systems Operators (MSOs) operating at national, state or district level and upgrading networks towards digitalisations and addressability)
    • new limit of 74% – up from 49% (for foreign direct investment, non-resident Indians and persons of Indian origin)
    • with foreign investment up to 49% now permitted under the Automatic Route and beyond 49% up to 74% under the Government Route – compared with just the Government Route previously
  • Cable Networks (other Multiple Systems Operators (MSOs) not upgrading networks towards digitalisations and addressability and local cable operators (LCOs))
    • no change to the previous 49% level
    • but now permitted under the Automatic Route rather than the Government Route
  • Mobile TV
    • 74% limit – previously mobile TV was not expressly permitted
    • with foreign investment up to 49% permitted under the Automatic Route and beyond 49% up to 74% under the Government Route
  • Teleports (setting up up-linking hubs/teleports)
    • new limit of 74% – up from 49% (for foreign direct investment and foreign institutional investors)
    • with foreign investment up to 49% now permitted under the Automatic Route and beyond 49% up to 74% under the Government Route – compared with just the Government Route previously

 

The revised foreign investment limits include foreign direct investment, foreign institutional investors, non-resident Indians, foreign currency convertible bonds, American depository receipts, global depository receipts and convertible preference shares held by foreign entities.

 

There are no substantial changes (other than in respect of categorisations of investment types as mentioned in the preceding paragraph) in relation to:

 

  • head in the sky broadcasting service (HITS) (74%, with the Automatic Route up to 49% and Government Route beyond 49% up to 74%)
  • up-linking a news and current affairs TV channel (26%, via the Government Route)
  • up-linking a non-news and current affairs TV channel (100%, via the Government Route)
  • terrestrial broadcasting FM (FM radio) (26%, via the Government Route)
  • print media (26%, via the Government Route, other than publishing and printing of scientific and technical magazines and speciality journals and periodicals or facsimile editions of foreign newspapers (100%, via the Government Route)).

 

A number of conditions, regulations and terms and conditions may also apply, including in relation to positions to be held by Indian citizens, security, infrastructure, monitoring, inspection and disclosure, national security and safety.

 

 

 

Context

 

India is currently undertaking switchover from analogue to digital television. The Cable Television Networks (Regulation) Amendment Act of 2011 makes digitisation mandatory by December 2014 across the country in four phases.

 

The additional liberalisation in the broadcast sector, by virtue of Press Note No. 7, is likely to attract foreign capital which may support ongoing digitisation, where capital expenditure on digital head-ends, back-end infrastructure and processes and set-top box (STB) installation is required. This will also help the introduction of a digital addressable system (DAS) to better identify subscribers where permitted.

 

The switchover to digital broadcasting, which requires much less spectrum, will also allow valuable spectrum to be made available for other commercial use ('digital dividend').

 

As well as aligning certain sub-sectors within the broadcasting carriage sector (in particular the three platforms – HITS, DTH and cable networks), the changes to the foreign direct investment regime also help to further align the broadcasting and telecoms regimes. Both regimes are applicable to certain content carriers (such as cable providers offering broadband services).

 

For example, telecoms services, internet service providers and end-to-end bandwidth are subject to a 74% foreign direct investment cap (via the Automatic Route up to 49% and Government Route beyond 49% up to 74%). The establishment and operation of satellites is subject to a 74% cap (via the Government Route), and infrastructure, email and voicemail 100% (via the Automatic Route up to 49% and Government Route beyond 49% (and subject to certain future divestment requirements)).

 

In July 2012, the Telecom Regulatory Authority of India also suggested that it would be initiating a consultation on the ownership of media (e.g. existing cross-holding restrictions) to ensure plurality and diversity of views in the country.

 

The liberalisation measures are designed to attract additional investment by foreign broadcasting companies, new entrants, investors and lenders into the broadcasting sector in India.

   

 

 

 For further information, please contact:

 

Mark Robinson, Herbert Smith
mark.robinson@herbertsmith.com
 
Veronica O'Shea, Partner, Herbert Smith
veronica.Oshea@herbertsmith.com
 
Chris Parsons, Partner, Herbert Smith
chris.parsons@herbertsmith.com
 
Nimi Patel, Herbert Smith
nimi.patel@herbertsmith.com
 

 

 

 

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