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Zee Sports, Ten Sports to run as separate entities: Subhash Chandranews
14 November 2006

Subhash ChandraChairman Zee Telefilms Subhash Chandra, says Zee Sports and Ten Sports will run as separate entities. He also plans to hike stake in Ten Sports post 2009 and the price for the balance stake in Ten Sports will be decided at a later date, reports CNBC-TV18.

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

Zee was bidding for the ICC global rights and so was Ten Sports. Should we read more into the fact that you have acquired Ten Sports at this juncture?
Don't you think it is much cheaper deal than buying the rights at $900 million?

Are you confirming that you bid $900 million and Ten Sports bid much less?
No, I am not confirming that. It was wrong reporting on part of a newspaper two days back since $900 million is an absurd number that anybody could bid.

We have bid a very sensible number although I cannot disclose that, the bid is likely to be opened on Friday.

Regarding the Ten Sports deal. Ten Sports is a channel, and other than the times when there is live sports channel, is the number one sports channel amongst all sports channels in India. It has got the telecast rights from the Pakistan Cricket Board, the Sri Lanka Cricket Board as well as West Indies Cricket Board. With the Sri Lanka Cricket board they also have the matching rights post 2008 when the rights expires.

We have taken 50-per cent stake and we can, after 2009, call for additional equity percentage, so that the other shareholders can put to us their additional shareholding.

The board composition of the company going forward will have four board members representing Zee and three representing Mr Bukhatir and henceforth because of the virtue of the law which considers this as controlling interest, we can consolidate the financial top and bottomline into our accounts balance sheet.

The other aspect of the transaction is that Zee Telefilms had money with its internal accruals and the payment has also been effected today once the board had approved the purchase.

You said you cannot disclose the amount that you have bid but are you privy to the Ten sports bid as well and could you tell whether Zee's bid is upwards or below $750 million?
It is much below that.

Ten Sports has also bid for the ICC Global rights?
That's right, they also have bid.

I believe you are saying that Ten Sports will have average revenues of $50 million over the next three years, an EBITDA of $14 million annually?
That's correct.

Where would these revenues come from? What rights are predicated on these kinds of revenues over the next three years for Ten Sports?
Currently in Pakistan there is one series going on between Pakistan and West Indies, and also next year there is Sri Lanka and India series and every year there are cricket as well as there are WWE which attracts lot of advertising revenues.

They are also being distributed in India by One Alliance and there is substantial minimum guarantee subscription revenue coming from One Alliance to Ten Sports.

Just these would account for Rs 225 crore revenues per year?
That is correct.

In the event of you or Ten Sports winning the ICC Global rights would you be able to beam all these rights that you are bagging in both the channels or just would Zee Sports cease to exist after the acquisition of Ten Sports as a channel?
No, both channels will run and exist. The different properties will be shared between the two channels. Some of the properties will still remain exclusively owned by Ten Sports because those have been guaranteed to the distributor that is one alliance in India and both will continue.

We will have different kind of sports as well as sharing different language commentary on cricket. We would like to inform you that Ten Sports do have another three beams, which are the Middle East beams, the Far Eastern beam and European beam. So there are revenues coming from those three different beams and markets as well.

At this point, would you say that the chances of you exercising that option in buying the remaining 50 per cent of Ten Sports when it comes up on offer are high?
That is not coming anyway next two years that is only from the third year onwards and basically the intent is that both partners should work together and then see if we want to change the existing shareholding.

Is the price on the option decided? Could you let us know what that the price is in terms of an enterprise value for the remaining 50 per cent?
It will be decided by mutual consent and after independent valuations being done.

Do you have any apprehensions about the revenue potential of cricket, because given the fickle form of the Indian cricket team, a lot of people are a little apprehensive of whether cricket can actually become such a big revenue generator? We have an apprehension, that's the reason we did not bid very high during the ICC bids and that will be seen next week. However at the same time, India is a cricketing nation, as I keep repeating, if the Indian team starts performing in one or two ODIs, the interest would be back again.

But on the other hand the revenues of Ten Sports has a $50-million topline.

Or $14 million EBITDA?
That's correct, both.

What have you factored in terms of distribution revenues?
They have bought the cricket rights and various other sports properties very sensibly in the past, at least three boards which they have.

If your revenue and EBITDA multiples are right, it seems like a very interesting price you have got it at. Not more than two times sales on current annual sales and 8 times EBITDA, why did Mr Bukhatir choose to sell at this price?
I would say that he feels that Zee can add value to his business much more than anybody else.

And you are sure having acquired Ten Sports, this whole distribution thing will pan out well in next few years because there is a cap on channel pricing, etc. Do you feel that will be resolved to extract more mileage out of distribution pie as well?
For two years the distribution deal is a firm contract with one alliance. It is only post financial year 2008, we have to see what do we and how do we exploit the distribution to the best possible thing from year 2009.

Do you need to raise any capital at all; of course you have paid as you said through internal accruals but to get your balance sheet back to the kind of size it was in, do you need to raise any capital at all on Zee's balance sheet in the foreseeable future? Not, in the immediate future.

So no dilution coming from Zee as such?
No dilution.

Next quarter onwards can we expect to see consolidated numbers for Zee and Ten Sports?
Next quarter onwards, yes.

When do we know the results of the ICC global rights, you got a date and time in mind?
I am told that next Friday is when they will open the financial bids and hopefully next Friday we will know about it.

How do you rate your chances given that you say yourselves that you have been very conservative?
We would go up to the point where it makes sense and profit. We will not be buying it as a loss leader. And more so specially now because we have four territory rights with us as a group, which is India BCC rights in a neutral territory, Sri Lanka, West Indies and Pakistan with Ten Sports.

So I do not think we need to go after cricket as a loss leader or any such thing. If it comes sensibly then we will take the rights otherwise we will wish good luck to whosoever buys those ICC rights at much higher price.

You almost seem to have given-up on those rights. Has the bid been that conservative that you are already bracing yourself to lead life without the cricket rights for the world cup's champion trophy at all for the next ten years?
No, I am not saying and if you feel that way then probably you do not know me well enough to be making that comments that's all I can say.

also see : Zee Telefilms takes 50-per cent stake in Ten Sports
Zee is best partner for growth: Chris McDonald

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Zee Sports, Ten Sports to run as separate entities: Subhash Chandra