Hathway and Den deal to help RIL gain market share: Brokerages

Diversified conglomerate Reliance Industries is likely to buy controlling stakes in cable television service operators Hathway Cable and Den Networks. The deal is expected to be positive for the company as it would increase its broadband business, brokerage houses said.

"Potential deal will give Reliance Industries access to broadband homes and subscribers, and will drive market share gains and help gain wallet share among consumers at top-end," CLSA said in its research note.

Macquarie said the primary benefit of this deal would be gaining access to the last mile, and the deal will strengthen the bargaining power of Hathway and Den with regard to broadcasters.

According to CNBC-TV18 reports on October 16 which quoted unnamed sources, Reliance is likely to announce the acquisition of Hathway Cable and Den Networks on October 17.

The board meetings of both companies Hathway Cable and Den Networks is to be held separately on Wednesday, to consider a proposal for raising funds by issuance of equity shares through one or more methods including further public issue/ADR/GDR/qualified institutional placement/preferential issue.

Even the board meeting of Reliance Industries is scheduled Wednesday to announce earnings for the quarter ended September 2018.

Sources told CNBC-TV18 Reliance may buy stakes via fresh equity issuance, which is likely to trigger an open offer for both companies.

The deal will help boost Reliance Jio's GigaFiber services as it expands its subscriber base and this deal is going to add premium customers for Jio improving their ARPU, above mentioned sources said.

CLSA said the absolute investment for acquisition would be small compared to its telecom capex. Reliance invested $35 billion for capex in its telecom business.

The acquisition will help get permissions, but still investment in laying last mile fibre is required, it feels.

Macquarie said the blending of Hathway and Den's cable operations with Jio’s plans will be key monitorable going forward.

The research house feels the deal will strengthen the bargaining power of Hathway and Den with regard to broadcasters, but put pressure on urban-focussed DTH operators like Tata Sky and Airtel.