Zee-9X: What's the big 'deal'?

Zee Entertainment Enterprises Limited gets ready to acquire INX's general entertainment channel, 9X

A few days ago, Zee Entertainment Enterprises Limited (ZEEL) firmed up its plan of acquiring 9X, the general entertainment channel from the INX Media stable. In a meeting, the board of directors of ZEEL approved the acquisition and intimated the same to the Bombay Stock Exchange.

The board is expected to meet again to finalise the details of the acquisition, such as terms of the scheme, the share swap ratio and the appointed date. Zee will reportedly pay Rs 65 crore for the acquisition, sources say.

Media analysts say that the buy-out will make great financial sense for Zee, which closed the fourth quarter of 2009-10 with revenues 26 per cent higher than the fourth quarter of 2008-09.

The acquisition of 9X is expected to provide huge tax benefits to Zee. A media observer says, "Any company which makes a lot of profit has to pay a fair amount of tax. If one is able to show losses as well, the tax payable can get considerably lower." Zee buying 9X, which has accumulated losses, will help Zee gain tax benefit and get the latter in the reckoning.

Along with discussions with ZEEL, INX Media had also been in discussions with the company's creditors to come to a settlement on outstanding dues in order to facilitate the acquisition.

Apart from the tax benefit, which is being perceived as the key motive of the deal, Zee will land up with a television channel license, which is valuable in today's times as the Ministry of I&B has been stricter on allocating licenses. Recently, the ministry had put a freeze on processing new licenses, citing scarcity of requisite infrastructure. Reports say that there are about 160 licenses awaiting approval from the Ministry of I&B.

Media observers say that programming/content wise, 9X has very little to offer. It had been airing repeats of its earlier shows and movies for more than a year, with an occasional new launch in between. The last new production on the channel was a show called Sambhav Kya?, which went off air in December 2009. The average weekly GRPs recorded by 9X in the last four months is 7.

What 9X does offer is viewer awareness and connect. A senior media planner says, "9X offers a platform that is already built and running. Besides, viewers are aware of such a channel and it does attract a certain number of advertisers."

Zee may look at re-launching 9X as its second GEC. Both STAR and Sony have second GECs in STAR One and SAB respectively. Zee's attempt at launching a second GEC, Zee Next, met with failure as the channel shut down within a year of its launch.

Hence, a second GEC is clearly missing in its portfolio. With the infrastructure already in place in 9X, the company will not have to start from scratch. "With some fresh programming infused, Zee could breathe life into the channel," says another media planner.

INX's private equity investors include Temasek Holdings, New Silk Route, New Vernon Private Equity Fund and Kotak Private Equity. Early last year, the English news channel from INX Network was bought over by Indi Media, a company promoted by Vinay Chhajlani and Jehangir Pocha. With Zee's acquisition of 9X, 9XM will be the only channel in the INX stable.