Media Sector Exciting, Telecom Stocks Cheap: UBS

Suresh Mahadevan of UBS AG, Singapore says media stocks (distributers and broadcasters) look attractive after the recent move to ease foreign direct investment limit in the sector. (Watch)

FDI limit in direct to home (DTH) and cable networks has gone up to 100 per cent. Non-news TV channels can also get 100 per cent FDI funding, while for news channels, the FDI limit has been raised to 49 per cent.

Calling media stocks "exciting", Mr Mahadevan said the sector can now get the much needed capital for the next stage of growth from global investors.

After achieving full digitization, next two big opportunities for the distribution sector (cable operator, DTH) is providing fixed-line broadband services and upselling (selling high quality content like HD channels), which will increase the revenue potential for the sector, he added.

"With television resolution improving, you do get a chance to upsell towards some group of consumers," Mr. Mahadevan told NDTV.

To provide fixed-line broadband and upselling, broadcasters need upgradation of their existing infrastructure, which needs capital investment and increase in FDI limit will help companies get the required investment.

Distributors struggling with low revenue per user (RPUs) will be able to increase revenues through upselling, Mr Mahadevan said. Upselling will also be positive for broadcaster as they will get higher revenue for their content, he added.

According to UBS, the media sector provides good opportunity for foreign investors as it has got large number of consumers. "Increase in ad revenues for distributors may be exiting for foreign investors," added Mr Mahadevan.

On telecom sector

Mr Mahadevan says Indian mobile companies looks extremely cheap as there is huge growth opportunity in data. "Rapid growth is expected in mobile data in next five years as only 7-8 per cent mobile users are now using 3G, which may go up to 60-70 per cent in next five years," he said.

According to Mr Mahadevan although the market is worried about the Reliance Jio launch, which can be disruptive for the sector, in the long run it is positive. "The sector will re-rate significantly post Reliance Jio launch," he said.

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