ZEE Telefilms restructured

Zee Telefilms Ltd has announced a major revamp following its board meeting on 29th March. Zee Telefilms has announced restructuring proposals relating to its news and cable businesses. It also announced an ��in principle�۪ approval of a proposal to demerge the consumer services business for DishTV. The Board of Directors has approved the restructuring proposal related to the de-merger of news and cable business while directing the management to evaluate the direct consumer services business (DishTV related) and the assess the effect of demerging it.

The cable business of Siticable and the cable related business of Zee Telefilms Ltd (ZTL) would be de-merged into Wire and Wireless (India) Ltd (WWIL), a new company. Shareholders of ZTL would receive proportionate shares of WWIL as consideration.

The other highlights include the proposal to de-merge the consumer services business for DishTV being met with in principle approval from the Board. The management has been authorised to evaluate the proposal and its consequences and present to the Board.

Subhash Chandra, Chairman, said that ZTL�۪s existing structure had ambiguities in its businesses. Enumerating these, an official communiqu̩ quoting him said,���Due to regulatory restrictions, the business of DishTV was structured in a very fractured manner and hence, was difficult for ZTL shareholders to understand. At the same time, the structure was also tax inefficient. The management of the businesses under the same Board was not focussed and hence, not able to capture the growth opportunities in the market as different skill sets are required for distribution to trade, which, in this case, is cable business, from skills sets required for direct consumer distribution which is DishTV.�۝

���The regulation in the news and news related broadcast content is different from regulation in entertainment and other content. Due to the technological advancement and changes, the media businesses have to be prepared for a forthcoming digital age,�۝ he added.

���We feel confident that these measures of restructuring these businesses subject to necessary approval would result in streamlining operations and better exploitation of opportunities in each area to build long term shareholder value. It would also clear the ground for acquisitions and strategic or financial partners in the demerged businesses, apart from unlocking shareholder value,�۝ said Chandra.

In compliance with the News Uplinking Guidelines of the Government of India, with effect from October 2005, newsgathering activities of ZTL were transferred to Zee News Ltd, while downlinking and commercial exploitation of all news-bearing channels was retained under ZTL. ���Despite a compliant corporate structure for news bearing channels (particularly regional channels), we have felt it important to bridge the divide and bring all the operational activities together, to create strategic focus, remove tax efficiencies and unlock shareholder value,�۝ Chandra further said.

Restructuring of News business

As per the scheme of arrangement the news-related business (Zee News, Zee Business, Zee Bangla, Zee Punjabi, Zee Marathi, Zee Telegu and Zee Kannada, which will be launched soon), will be demerged into Zee News Ltd (ZNL) (name to be changed suitably) and the shareholders of ZTL would receive proportionate shares in ZNL. Based on the relative valuation and the resultant swap ratio, FIIs would be allotted shares in ZNL in compliance with Government of India guidelines. In case the allotment works out to more than 26 per cent, FIIs would be allotted preference shares of equivalent value on a proportionate basis.

The scheme of arrangement would require approval of the stock exchange, shareholders and creditors of Zee and from the Bombay High Court. Zee News Ltd would be listed on all stock exchanges where ZTL is listed.

Restructuring of the cable business

Over the years, business models of our content business and distribution business, including cable operations have diverged considerably. Despite large and well-positioned investments the cable assets have been under-utilised and have been marginal contributors to Zee financials. On the other hand, there have been vast technical advances in cable that can be optimally exploited from our well-distributed asset base.

To properly address the emerging business opportunities in digitisation of cable and convergence, there also are large funding requirements. And the regulatory requirement applicable to cable distribution is very different to broadcasting. Combined with the fact that the competitive environment of distribution business is also different, it was felt that an invigorated corporate and governance set up is essential to aggressively address the emerging opportunities.

As per the scheme of arrangement the cable business of Siticable, a 100 per cent subsidiary of ZTL and the cable related business of ZTL would be de-merged into WWIL.

Restructuring of consumer business for DishTV

The direct consumer business is marked by division of activities between the DTH license holder ASC Enterprises Ltd (ASCEL) and the subsidiaries of Siticable. It leads to lack of clarity in structure, inefficiencies in tax and diffuse strategic focus. Accordingly, the Board was briefed about the opportunity of bringing it all under one company and the process required for it.

As per the proposal, the direct consumer related business of ZTL can be de-merged into ASCEL, with the shareholders of ZTL receiving shares in ASCEL in proportion, based on the relative value, as consideration. The proposal has met with in principle approval of the Board. The Board has authorised management to evaluate the proposal and its effect and present to Board for final approval.

Subject to necessary approvals, Timelines and way forward, the entire scheme of arrangement would take five to six months to implement, subject to all necessary approvals.