Telecom Regulatory Authority of India (TRAI) has recommended increase in the foreign direct invest (FDI) limit in the digital broadcast carriage service sector from 49 percent to 74 percent, including DTH, IPTV, Mobile TV, Teleports, and MSOs. These limits are similar to the earlier suggestions made by TRAI in 2008 but not acted on the by the government as there were overall changes made to the method for computing FDI.

All FDI above 26 percent will require government permission, which is likely to be routine once the new FDI limits are accepted by the government. TRAI has also taken this review opportunity to lower the FDI limit for local cable operators from 49 percent to 26 percent. The FDI limit for FM radio has been recommended at 26 percent, up from the present 20 percent but down from the earlier recommendation of 49 percent. And news channels stay at the present FDI limit of 26 percent, as TRAI has reversed its earlier recommendation of 49 percent.

The media and entertainment sector has seen marginal 1.2 percent growth from Rs.57,900 crore in 2008 to Rs.58,700 in 2009 owing to the sluggish world economy but is expected to grow at a CAGR of 13 percent over the next five years. Television is the largest component of this sector and is expected to grow at 15 percent over the next five years. Strong FDI flows into this sector, particularly DTH and digital cable, will help achieve this growth.

In an interesting development, the Anil Ambani led Reliance Communications is bundling its DTH and IPTV business, as well as the cable business of newly acquired Digicable, into a new entity called DigiCom that will now have a subscriber base of 11 million. This catapults Reliance into a leadership position in the pay TV business and provides a larger platform to build its DTH and digital cable business going forward. Are we going to see other DTH players follow a similar acquisition strategy going forward?

DTH operators have used the soccer world cup opportunity and Wimbledon to promote HDTV services and bundled this offering with aggressively priced HDTV set top boxes. Consumers are certainly noticing and the larger metros are seeing enquiries for HDTV, many of the leading consumer electronics brands have introduced HDTV products across their LCD and LED range, and there are entry level HDTV products now available as well. HDTV is likely to gather momentum going forward.