The merger deal between Zee Entertainment Enterprises Limited (ZEEL) and Culver Max Entertainment (Sony) will bring revenue synergies of 3-4 per cent for the merged entity, ZEEL chief Punit Goenka said during the company's Q2 FY23 earnings call. On a standalone basis, ZEEL's revenue will see synergy benefits of 6 per cent, he added while stating that the synergies will be mostly revenue-driven.
"It will be largely revenue driven and we are expecting about six odd per cent synergy benefits of Zee's standalone revenue and if you would look at it on a combined basis it will be between three and four percent of the combined MergeCo's revenues," Goenka told analysts.
He further stated that the synergy benefit will mainly come from advertising revenue while the subscription revenue synergies will depend on the amendments that the Telecom Regulatory Authority of India (TRAI) makes to the New Tariff Order (NTO). The regulator is expected to come out with amended tariff order any time soon.
"The most lucrative area is the advertising pie and based on how the new NTO shapes up and how we bring the two bouquets together will determine whether even in a subscription we can see a bump up. Right now, synergy is largely driven by the international markets, digital business, and advertising," Goenka added.
The Competition Commission of India (CCI) recently approved the Sony-Zee merger with slight modifications which will see the latter selling three of its channels to allay potential competition concerns. The merger deal was subsequently approved by a majority of ZEEL shareholders.
Goenka also said that the merger will get completed within this fiscal. He also stated that the company will get delisted for about five to six weeks following the merger. "So for the timelines of the merger completion, we are working with a target that it should be completed within this financial year and this is something that we are grappling with on a daily basis because these regulatory approvals are required and we can't give you one final date."
He noted that ZEEL has been able to moderately grow its advertising revenue sequentially in Q2 despite the macroeconomic headwinds. "We remain hopeful of a steady recovery in the advertising environment during the second half of the fiscal given some of the green shoots due to a good monsoon and the onset of the festive season," he said.
Speaking about the acquisition of the ICC cricket rights, Goenka said that the sports business is a key focus area for the company. "In addition to strengthening our current offerings, we are also consistently identifying newer growth opportunities for sustained value creation. We took yet another firm step in this direction by sharpening our strategic vision to build the sports business for the company. The strategic licensing agreement inked with Disney Star makes Zee the exclusive TV destination for all ICC events starting in 2024. Going forward all our investment decisions to make the sports segment a compelling value proposition for the company will continue to be taken with a prudent approach," he elucidated.
ZEEL, Goenka said, doesn't need to launch sports channels since the merged entity will have a formidable sports network. "We will have a formidable sports network in the MergeCo and there is no reason why we will not use that as a platform. In the unlikely event that the merger does not take place, we will have to launch sports channels," he said.
On the impact of the pullout of Hindi GECs from DD Free Dish by the big broadcasters, Goenka said that the move has helped in arresting the decline of the pay base of the direct-to-home (DTH) platforms.
"Absolutely, the churn has been reduced and the subscriber base is now stable at the 53+ million mark. In fact, in September, it was 53.8 million so it's a healthy sign. We were hoping it will increase but that has not translated yet and the industry is going to wait and watch before we take a decision on what way we want to go," he added.