Paranjoy Guha Thakurta - What Future for the Media in India? Reliance Takeover of Network 18
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 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 – 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 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. The Eenadu group runs both news and general entertainment television channels in Andhra Pradesh, Telengana, Uttar Pradesh, West Bengal, Maharashtra, Karnataka, Odisha, Gujarat, Madhya Pradesh, Chhattisgarh, Haryana, Bihar, Jharkhand, Uttarakhand and Himachal Pradesh in various languages including Telugu, Kannada, Hindi, Bengali, Marathi, Odia, Gujarati and Urdu. (Over and above the media, the group headed by Ramoji Rao has interests in chit funds, processed foods, besides the production and distribution of feature films.)
In short, the media conglomerate which is now owned and controlled by the Reliance group will have its footprint spread not only across the length and breadth of the country, but also across different genres of news and entertainment. As RIL itself stated in its 30 May official statement: "The acquisition (of the Network18 group) will differentiate Reliance’s 4G (fourth-generation telecommunications and high-speed data transfer) business by providing a unique amalgamation at the intersection of telecom, web and digital commerce via a suite of premier digital properties".
Complex Deals in TV18
Over the years, as Bahl expanded his business operations, the journalist in him took a backseat. (In the interest of transparency, it is being disclosed here that the writer of this article was employed by the Television18 group as features editor and anchor between October 1995 and March 2001 and thereafter, was a consultant with the group till December 2001.) In more ways than one, his corporate conglomerate started resembling the business empire founded by the late Dhirubhai Ambani in terms of its structure. Like the Reliance group, the Network18 group set up dozens of companies, including some in tax havens like Mauritius, with complicated cross-holdings of shares.
Like the Ambanis, Bahl and his associates struck multi-layered deals that often concealed more than what was revealed. Closely-held companies were used for this purpose. For instance, IMT subscribed to debentures in RB Mediasoft Pvt Ltd, RRB Mediasoft Pvt Ltd, RB Media Holdings Pvt Ltd, Aventure Marketing Pvt Ltd, Watermark Infratech Pvt Ltd and Colorful Media Pvt Ltd, all of which were controlled by Bahl.
As Rahul Bhatia, who writes for Caravan monthly and who has examined the balance sheets of Network18 group companies, pointed out in the magazine's website on 3 June:
...the operations and balance sheets of these companies merged and detached often, allowing the company’s management to value assets in ways that were lawful but nonetheless confounding to outsiders... One feature of these exercises was the convoluted issuing of equity: a large restructuring in 2011 left small investors furious, and analysts wondered how the company had allocated debt during an earnings call.... Other vagaries of accounting were apparent in the footnotes of the company’s public documents. For instance, it acknowledged hiding losses over Rs 650 crore in a footnote on page 82 of its 2013 annual report, using a method that, accountants told me, would give them pause...
Bhatia added that certain corporate entities controlled by Bahl loaned large sums to a trust that purchased Network18’s shares in questionable transactions. He wrote:
Capital flowed between his public companies and private companies in tax havens, disappearing and appearing in the fine print of these companies’ financial reports. The transactions his companies undertook were so many, and so complicated...
Well before the results of the elections were known, Bahl had openly supported Narendra Modi's candidature as prime minister. In April 2013, the then head of Network18 had personally anchored a "Think India Dialogue" featuring Modi. On that occasion, the then chief minister of Gujarat had made a few sarcastic comments about the Planning Commission's financial support to tiger conservation projects, alluding to Network18's rival group, NDTV. This is a verbatim account of what Modi said during his public conversation with Bahl:
Planning Commission mein charcha hui, …Tiger ke liye 200 crore rupaiye diye, bharat sarkar ne diye. Shayad woh NDTV usise chalta hai. Mujhe pata nahin..." (There was a discussion in the Planning Commission on tiger conservation. The government has allotted Rs 200 crore for this. I don't know if NDTV also runs on this money.)
Modi then went on to wonder if the Planning Commission thought tigers were secular and lions (which Gujarat has in sizeable numbers) were communal, to general mirth among those assembled in the audience. Sources in NDTV have told this writer that its “Save the Tiger” campaign on its television channel was sponsored entirely by private companies and no money was received from any government agency.
After Reliance invested in Network18, the group downsized drastically. In August 2013 alone, the group summarily sacked over 350 employees in a matter of less than a week. In the past too, the group had asked many of its employees to resign because its expansion plans failed to fructify. Over the last year or thereabouts, the finances of most companies in the group had shown distinct signs of improvement, with debt on the decline and profitability on the rise. But that did not stop Mukesh Ambani from stepping in to take full charge of the media group's operations with his trusted confidantes.
After the Elections
As the elections were taking place, there was considerable speculation about the future of certain prominent anchors on television channels owned by the group. When the outcome of the elections were known on 16 May and it became clear that Modi would become prime minister and the Aam Aadmi Party (which had publicly criticised Reliance and Mukesh Ambani) would not have even a handful of MPs in the Lok Sabha, rumours about the imminent takeover of Network18 intensified. As subsequent events indicated, the speculation was indeed based on fact.
Was RIL's formal takeover of Network18 a "hostile" one, as certain reports have suggested? Perhaps, in a strict sense of the term. But many would argue that Bahl should have read the writing on the wall, that what took place should have been anticipated by him.
As for the Independent Media Trust, its existence is now truly redundant in the new scheme of things. As an editorial in the thehoot.org website, which tracks the media, put it on 31 May: "Whoever thought up the name had a delicious sense of irony". For, from now onwards, a large section of the media in India could well be perceived to be a little less independent or, for that matter, trustworthy.
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