'It is absolute rubbish that MCCS is a dummy company'

Peter Mukerjea, Star TV India CEO, talks to Surajeet Das Gupta about the current controversy over his news channel's ownership.

Excerpts:

By publishing the open letters in the papers you have virtually named your corporate rivals.

I think the whole issue of corporate rivalry in the media industry is really not designed to solve a problem that exists today. I think it is designed to look at the direction in which the industry will go.

Readership of these papers compared to growth of viewer-ship of television are two ends of the spectrum. There are only 40 million cable and satellite homes and 75 million TV homes in the country but there are over 150 million homes.

So the opportunity for growth for TV is substantial which is not necessarily the case for the print medium.

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Therefore, when you have this kind of dynamics which is working in the industry, people in the print medium will be looking at the future. And they will be saying that there is need to do something to this awesome viewer-ship that Star has built.

Corporate rivalry existed when Star first arrived in the marketplace. There were allegations that Star was creating a cultural invasion in the form of MTV and The Bold and the Beautiful which were corrupting Indian society.

But nobody talks about it anymore because our content is completely Indian. The new aspect of the conflict is in news and after sometime it could be sports.

Did you feel that the Birlas ditched you by walking out as shareholders?

Not really. I can't comment on their reasons but it was unfortunate. But it is better that it happened now rather than later so that we can set it right and move on rather than having a shareholder who is continuously unhappy.

Suhel Seth who now holds 30 per cent equity stake is known to be a close friend of yours. He runs a small outfit and even held a party in your honour after you got married. So there are allegations that he is closely linked to Star.

Suhel and his company have had no business association with Star. I have known him for some time and he seems to be a perfectly good, willing partner. He was very much the first choice to take over the Birla equity.

Your detractors allege that you have used loopholes in the law to come to India.

We are not doing anything that is wrong. And if you look at industries like telecom and insurance I don't think their structures are in any way different.

Some quarters in government say that MCCS is a content company functioning like a news agency so it should not be allowed any foreign equity. Your comment?

We haven't heard anything from the government. The legal opinion we have is that we are not an agency.

There are allegations that MCCS is a dummy company and that many of its shareholders run companies that do not even have turnover of over Rs 1crore (Rs 10 million). Did you, for instance, ask Suhel Seth how he would pay for the 30 per cent equity stake?

It is absolute rubbish that MCCS is a dummy company. We have complied with the law. I do not know what Suhel's asset base is; we asked him if he could afford it and he said yes.

The fact of the matter is that we applied for a new licence under Star TV in September 2002. At that time there was no restriction of equity for up-linking.

We hired journalists and bought equipment as we had to start the channel from April 1 -- we can't start a channel overnight.

But the rules were changed on March 26 -- four days before our launch -- so we transferred all the staff to the new company which, at that time, was not operational.

We could not crystal-gaze that the 26 per cent restriction would come.

But how did you put together a new company and shareholders in four days?

The company was already there but it was not operational. But if you are saying that the shareholders are not acceptable, my question to you would be is one Indian not better than another Indian?

But why do you think the government is asking you so many questions if everything is okay?

They are asking for clarifications on the application -- if they didn't they would be accused of not doing their due diligence. There is no reason for us to fear.

There have been allegations in some quarters that you have given programmes to Bag Films, which is owned by the information and broadcasting (I&B) minister's sister who is married to the MP Rajiv Shukla, and that you are using this as a way to influence the government.

I don't know what you mean but the fact is that we have had a relationship with Bag Films for the last five years, much before Ravi Shankar Prasad was I&B minister.

You could have argued on those lines if we had given programmes to her after her brother became minister. The argument of influence is very feeble.

Many people are raising questions on why you set up a separate infrastructure company and suddenly transferred some of the employees to this company. Was it done to reduce the paid-up capital in MCCS so that the shareholders did not have to pay much for the equity? Again, the issue of it being a dummy company comes to the fore.

Originally, the equipment was bought by Star TV. But when the rules were changed on March 26, we decided to transfer the equipment to a new company. That is because the rules did not require the content company to also own the infrastructure. Under the new company we could rent out the machines as well.

Also, because we were given only three months to find new Indian shareholders, we did not want them to take part in a business where there was a substantial investment in equipment. But in due course we will shift the equipment back to MCCS.

The idea was to have a content company that will only supply content and an infrastructure company that will only be in the business of providing infrastructure.

But surprisingly, you had no problems having the two businesses in the same company in Star TV earlier.

At that time Star TV was a 100 per cent company and there was no reason for a change.

Considering the fact that foreign investment was not allowed in FM radio you again used the loophole to get into it by tying up with the Mittals. Was that fair? After all Radio City is run by Star people.

Someone needed to do that, in the radio business we sell the time and the software but we don't own the licence.

Isn't that wrong?

Let me put it this way. It is like a credit card company appointing a collection agency to collect outstandings.

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