What are the advantages in the Airtel acquisition of Dish TV?

Let us first understand what this deal is al about. This deal was first proposed in 2019 but fell through in 2020 over valuation concerns. Of course, we are talking about the deal for Bharti Airtel to buy out Dish TV and that deal has now been revised once again with high level deliberations and valuations and due diligence in full progress. If the deal fructifies, Airtel gets a controlling stake in Dish TV as well as a whopping 50% of India’s DTH market.

Progress has been on at multiple levels. For example, Bharti officials have conducted talks with Subhash Chandra of Essel group over the likely share. The Subhash Chandra family owns 5.93% in Dish TV. Meanwhile, EY India has already completed the due diligence of Dish TV financials on behalf of Bharti Airtel and submitted the report towards the end of October itself. Based on this report, Bharti Airtel has made a bid at Rs.20 per share for Dish.

In the midst of the economics of this deal, Dish TV is currently already fighting a pitched battle for control with Yes Bank. Now Yes Bank had acquired a 25.63% stake in Yes Bank by invocation of pledge. Hence if the deal has to go through then Yes Bank’s buy-in will be very critical. However, Bharti Airtel has said that it would refrain from making a hostile bid for Dish TV. Post the promoter stake and Yes Bank stake, Airtel will make open offer to public.

For Bharti, this is about leadership in the DTH space. Dish TV may have slightly higher revenues but their EBITDA is lower than Airtel. Also growth of Airtel is more aggressive. But this is a winner take it all business. The combination gives Airtel a dominant 50% market share of the DTH space, compared to 33% for Tata Sky. However, at Rs.20 per share, the offer is at 1.50 times EV/EBITDA, which may not be acceptable to Goel and to Yes Bank.