labels: zee group, m&a, marketing media
Zee is best partner for growth: Chris McDonald news
14 November 2006

Taj TV has chosen a partner that's best for its future growth says Chris McDonald, CEO of Abdul Rahman Bukhatir's Taj TV. CNBC-TV18 shares with domain-b its exclusive interview with McDonald:

After wavering between Zee and Sony, Ten Sports finally sold controlling interest to Zee in a cash deal worth over Rs256.6 crore.

CEO of Taj TV, Chris McDonald believes the company has chosen a partner that's best for its growth in the future of the business. He gives his view on this partnership, along with the numbers that the company is targeting for the future.

CNBC-TV18 shares with domain-b its exclusive interview with McDonald:

Could you break your revenues and EDITDA levels? Where did the $50-60 million revenues per year come in for Taj TV or Ten Sports today? Are you likely to operate on these kind of EBITDA margins over the next two years?
Actually, we are very confident and comfortable with the numbers that have been released. $50 million to $60 million is correct in terms of top line of revenue and $14-$15 million EBITDA over the next several years.

Of course, India is an important source of revenue for us in both advertising and subscription, but our business is drawn from many countries. We are basically on air from Japan, although it is the Middle East subcontinent, into continental Europe and North Africa and Middle East.

So the channel business is quite strong. We also do a lot of production work and transmission work for other channels.

Can you give us an indication of how aggressive you have been at Ten Sports with your bid for ICC global rights?
We are not certain on exactly how many parties have bid globally, but we have put in what we believe is competitive and a sensible bid.

Zee has also put in a bid and we believe that ESPN has put in a bid for at least the subcontinent. So we are not sure if it extends beyond that, but we think in the course of next week or so, more will come out as the meeting takes place in Dubai with the ICC amongst the various bidders.

Which way will the cost of this bid be split between Ten and Zee? Is that an option that you have talked about?
I am obviously not in a position to be able to disclose the kind of bids that we have made, but should we be successful, we will have discussions with Zee, and see if it is possible to have some sort of sharing arrangement. But if Ten Sports is a winner, we will have to see how it plays out after that.

We understand that Zee has the option of acquiring the remaining 50-per cent stake after 2009. As a management, how open are you to that?
That will be the shareholders' decision. The current management stays in place until that period of time. We remain 50-50 and then after that, if the shareholders wish to change, that is left to them.

So I think both parties are very happy to be working together, and will bring a lot of value. Mr Chandra and Mr Bukhatir have known each other a very long time. This partnership brings together two complementary groups, both having significant strength. So we are really looking forward to what we can do with them in this partnership going forward.

The deal was struck at what seemed like a very attractive price point for Zee, just over two times annual revenues. Does it, in any way reflect your primary shareholder Abdul Rahman Bukhatir's view that cricket is no longer a lucrative business compared to the last two or three years?
Things have certainly changed. It is a lot more competitive now. You have a lot more entrances to the business; rate fees are certainly increasing significantly, etc. But we believe that over time these things will level out and correct.

I don't think Mr Bukhatir believes that this business is any less attractive than it has ever been and we based the deal essentially on EBITDA multiple, which we felt was a very good deal for Mr Bukhatir. I don't think there are any issues in terms of valuations or the outlook on the business going ahead.

You see yourself holding those 30 per cent EBITDA margins over the next three years because that's very important for Zee shareholders today after the takeover? We too are very comfortable with where are. We have a number of rights that would be locked up for number of years to come as well as most of our revenues, which are contractually based. Our markets are growing very significantly.

So I think we are very comfortable with the numbers as they pan out going forward. Then of course, in the longer-term given this partnership that we now have, I am also very confident in terms of our ability to acquire rights at sensible valuations, maybe we could exploit those rights.

To maintain these $50 million revenues, what sort of properties will you be bidding for in the next two-three quarters? What are the big things that you have in sight at Ten Sports?
Of course, there is the ICC, which is going on right now and we intend to bid for certain other properties, which are coming up and will need to be renewed over the course of 2007 and 2008. We intend to bid for all the ones that we think make sense for us.

As far as our numbers or top line revenues are concerned, I still believe we are going to increase that, by hopefully many times over in the years to come.

Any differences or rather have you had any conversations with One Alliance in terms of what happens with content distribution from hereon?
We have a contractual arrangement with One Alliance, which of course will be honoured through the end of this term.

There are certain programmes, which are on Ten Sports and continue to be on Ten Sports. So I don't think there are any issues as far as changes in distribution arrangement that we have with One Alliance is concerned.

We have been hearing all sorts of speculations on who is bidding for Ten Sports. Could you confirm whether Sony was indeed in the race and whether they actually put in a financial bid for your stake?
No, I cannot. That's all subject to confidentiality provisions, but yes, there were number of parties interested in a partnership with Ten Sports. But I think we have chosen a partner that's best for growth in the future of the business.

also see : Zee Sports, Ten Sports to run as separate entities: Subhash Chandra
Zee Telefilms takes 50-per cent stake in Ten Sports
Zee-Ten Sports: A sporting partnership

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Zee is best partner for growth: Chris McDonald