In a significant move to strengthen their positions in the rapidly evolving Indian telecom and entertainment sectors, Bharti Airtel has announced plans to merge its Direct-to-Home (DTH) division, Airtel Digital TV, with Tata Play. This Airtel-Tata Play collaboration, structured as a share-swap agreement, will see Airtel hold a majority stake of 52-55% in the newly combined entity, while Tata Play’s shareholders, including Tata Sons and Walt Disney, will retain 45-48%.

This merger comes as part of a strategic effort to capitalize on the growing demand for bundled telecom, broadband, and DTH services. Airtel aims to enhance its competitive edge in the market by offering a more integrated entertainment and communications package to consumers. The move comes in the wake of Reliance's ambitious merger of Jio with Star India-Viacom18, forming JioStar, which has become India’s largest media and entertainment conglomerate. Should the Airtel-Tata Play deal be completed, it will mark the largest merger in the Indian DTH sector since the 2016 merger of Dish TV and Videocon d2h.

Through this merger, Airtel Digital TV will gain access to Tata Play’s large customer base, which includes 19 million homes and 500,000 broadband subscribers. The combined entity will serve 35 million paid subscribers, generating annual revenues of over ₹7,000 crore. The DTH merger values both Airtel Digital TV and Tata Play at ₹6,000-7,000 crore, marking it as one of the most valuable transactions in the Indian DTH market in recent years.

DTH struggles amid OTT growth

However, the DTH market competition has been steadily intensifying, with more consumers shifting toward OTT platforms and digital streaming services. According to the Telecom Regulatory Authority of India (TRAI), the number of DTH subscribers fell from 70 million in FY21 to 60 million in FY24. This shift indicates a larger trend of consumers moving away from traditional pay-TV services and towards OTT content. Telecom companies, like Airtel, are positioned to leverage this change by integrating OTT offerings into their broader telecom and broadband packages.

In response to this evolving landscape, Tata Play has been diversifying its services and exploring new digital channels to retain customers. However, both Bharti Telemedia and Tata Play face significant regulatory hurdles, particularly unresolved license fee disputes with the government. Bharti Telemedia’s dues total ₹5,580 crore, while Tata Play faces ₹3,628 crore in liabilities, adding an element of uncertainty to the merger's financial outlook.

Tata Play, once valued at $3 billion before the pandemic, has seen its valuation drop to around $1 billion. The merger with Airtel presents a crucial opportunity for Tata Play to revitalize its business and explore new avenues for growth in the broadband and OTT sectors.

Airtel-Tata Play deal’s potential

Due diligence for the merger is expected to begin soon, and if everything proceeds as planned, the deal could significantly impact the Indian telecom mergers landscape. By combining their strengths, Airtel and Tata Play will be better positioned to compete in the increasingly competitive telecom and entertainment sectors. This merger has the potential to reshape India’s TV and broadband market, offering consumers a more integrated, dynamic service offering that meets the evolving demands of the market.

The proposed merger also serves as a reflection of broader trends in the global telecom industry, where operators are consolidating their offerings to adapt to changes in technology and consumer behaviour. If successful, this merger could set a new precedent for future Indian DTH market consolidations and Indian telecom mergers, further shaping the future of India's entertainment and broadband sectors.