In the tussle between the Ministry of Home Affairs, the Ministry of Information & Broadcasting and the Sun Group, Sun is unlikely to take the MHA’s denial of security clearance to its Radio and TV channels lying down. But how will it tackle the blow?
BY SIMRAN SABHERWAL
(With inputs from Abhinna Shreshtha)
A good thriller has its fair share of ups and downs, and what keeps the viewer hooked is the curiosity to know what will happen next. The current imbroglio involving the Sun Group and two Ministries of the Government of India is no less than a thriller. The company’s recent woes have sent its stocks on a downward spiral, while ambiguity prevails over the network’s fate. There is still no clarity on what will happen to Sun Group, one of the largest media conglomerates in India. Will the government go ahead and cancel its licences or will Sun emerge from behind the clouds and shine bright once again?
It all began in May this year when Radio operators were gearing up for the Phase III Radio auctions, and news broke that the Ministry for Home Affairs (MHA) had not yet given the Radio arm of the Sun Group - Red FM and Suryan FM (in Tamil Nadu) - security clearance. The MHA also denied security clearance to the Group’s network of 33 TV channels and even its cable business. This news took the entire media fraternity by surprise and was yet another chapter in the ongoing tussle between the Ministry and Sun Group and its founder and Head, Kalanithi Maran. The denial meant that without the Home Ministry’s clearance, the 45-station Radio network - one of India’s largest - would lose it licence to operate in India. Even though the chance of this happening is remote, it still remains a possibility. This issue was also one of the reasons for the delay in Phase III Radio auctions and led to the Ministry of Information & Broadcasting (MIB) taking up the issue with MHA, and the Prime Minister’s Office (PMO) directing the Home Ministry and the MIB to sort out the issue between them.
‘We have a buy rating on the Sun Group stock with a target close to about Rs 380’
TALKING LEGAL
The most likely way out of the current stalemate is for the Sun Group to approach the courts seeking legal intervention. Increasingly, it seems that this might come to pass if the current impasse continues. A Radio industry executive opined, on condition of anonymity, that this might actually be the best course of action available to the company. Some good news for Sun came when Attorney General Mukul Rohatgi stated that the decision not to grant security clearances to the channels was not legal. After reviewing the case, Rohatgi stated that denying security clearance to 33 channels of the Sun TV Network on the grounds that the promoters are being investigated for corruption cases is not legal. He added that security clearance can be granted as according to security agencies, these cases are related to corruption and not national security. The Attorney General’s opinion is generally considered by - but is not binding on - the Government. In the event that the MHA’s decision stays, Sun has the option of approaching the courts and contesting the order and this is where the view of the Attorney General will carry weight.
“Legally, the Attorney General (AG)’s opinion is right, as a company cannot be denied security clearance on the basis of corruption cases, which, by the way, are still being contested in court. The court will also take the AG’s opinion into consideration as he will be representing MIB in court, once that route is taken. If the Home Ministry still sticks to its decision despite the court asking for a review of the decision, Sun has the option of challenging the order in court,” opined the legal head of a media company, who did not wish to be named.
This is a stance that MIB agrees with, as promoters of other channels too have criminal cases pending against them, and shutting a channel on the grounds of such cases could be fraught with the risk of successor political regimes using the precedent to clamp down on inconvenient viewpoints.
Some cheer for Sun came from the Radio fraternity as they pledged their support to Red FM and Suryan FM. The Radio industry has also petitioned the government that the individual and the organization should be seen as separate entities, while taking the final decision. Industry insiders also expressed their disappointment that the company should suffer for the alleged misdemeanours of the promoter. “The Sahara case was even bigger, but the company was allowed to function even when the owner (Subrata Roy) was jailed. There is no reason why all the people associated with Red FM and Suryan FM should pay,” said an industry veteran who also did not wish to be named.
While the two companies can approach court and ask for redress, the MIB can grant an intermediate licence extension to the two Radio channels until the legalities are sorted out, said a Radio executive. Earlier this year, Suryan FM had won a temporary licence extension upto June 16, after appealing to the Madras High Court. However, according to a report in the Indian Express, the Home Ministry could grant security clearance to Sun TV Network channels if there was a change in ownership or the company disbanded its board of directors.
The MHA, on its part, seems determined to stick to its verdict on the Sun TV Network, and has not paid any heed to the counsel from the Attorney General which favours the media company. In fact, Home Ministry officials were quoted by media reports as saying that in this case, the Ministry does not agree with his legal opinion.
Media reports mentioned that the promoter of the Sun Group wrote to the Prime Minister, stating that the Sun TV Network and the Radio channels were being singled out by the MHA in granting security clearance. It was also reported that Maran mentioned 16 media groups with promoters and directors facing criminal cases and said that the MHA has not denied them security clearances. The MHA again clarified that there will be no security clearance to the Sun Group as “several rules have been violated by the owners”. Media reports also said that as per senior Home Ministry officials, the stand is clear on the Sun Group case, and there is no provision under the law for issuing security clearance and it also doesn’t matter if different opinions were being held.
In fact, post the Sun Group issue, the Government has decided to change some norms for granting licences to television operators. In order to get a licence from the Government, a channel needs to provide a self-declaration, saying that there are no criminal, financial fraud or national security cases such as links with terror groups, pending against them.
After the MHA’s decision, the MIB also sought legal counsel and the only option now for the Sun Group would be to approach court to seek relief. Soon after news reports came out that the Home Ministry had held back security clearances, the listed media company saw its biggest fall of around 22% in share value on Monday, June 8 on the bourses.
CAUSE FOR SEPARATION
Legal experts point to two fundamental factors in favour of the company, the first being that a company cannot be held responsible for the actions of an individual, and the second being that all the cases are still under investigation and there is no court verdict as yet. “The right to do business is a fundamental right. Unless you can show that the company has been incorporated to run illegal activities, then there is no reason for the company to suffer,” opined the Managing Partner at a Mumbai-based law firm.
The most likely way forward, according to them, is for the company to approach the court for a directional order for a stay on auctions. If the court’s decision favours the company, it can tell the MIB and MHA to consider granting it licences on the basis of merit. If both still cannot come to a consensus, then the wait could be as long as two months until the court verdict comes.
Another option before the Ministry is that it could delink the two issues and allow the Sun TV Network and its Radio arms to continue operations, while the investigation against Maran is carried out in parallel. Many believe that any action taken should be against the promoter as he is the Chairman and Managing Director, and not on the TV and Radio channels. It would not be fair to shut down the TV and Radio channels, particularly when there are so many employees involved. The delinking of the cases attached to the promoters from the Network could see it getting the necessary security clearance, as well as licences for the 33 channels.
But with the MHA adamant on its stand of not granting security clearance, it is expected that the MIB will issue a show cause notice to the Sun Group. This will allow the Group to present its side of the argument in court, while allowing MIB to be cautious in its approach to give a final decision on the issue.
However, competitors and critics of Sun say that the company enjoyed a monopoly for several years and through its cable distribution arm, never allowed anyone else to grow. However, a proper investigation needs to be done and the Group penalized for any misconduct whatsoever, though many believe that in the current stalemate, Sun is on a strong footing.
THE THIN RED LINE
If the Sun Group does not get the mandatory security clearances from the MIB, then its 33 TV channels and 45 FM stations, Red FM and Suryan FM, could be on the brink of shutting shop. Looking at only the Radio vertical, it is estimated that the financial implications could amount to a loss as high as Rs 400 crore to the government exchequer in terms of migration fees and other auction money. Looking at the stock market, the losses incurred by the company are pegged at around Rs 6,000 crore, out of which promoter Kalanithi Maran is estimated to face a loss of around Rs 4,500 crore as per an interview given by S L Naryanan, Group Financial Officer, Sun Group in the Business Standard recently.
In an earlier instance, the Madras High Court had pulled up the MIB and MHA in the case of Kal Cables for not giving Sun Group a fair chance to present their arguments before directing closure of the cable network. The High Court had then set aside the MIB order on the closure of Kal Cables operations. While Minister for Information and Broadcasting, Arun Jaitley, is expected to take a decision soon, a source suggested that the I&B Minister is not likely to go against his colleagues in the PMO and Home Ministry. Though this scenario is possible, the Minister will also have to weigh this alongside the fact that the absence of a major player in the auctions would lead to financial setbacks to the government exchequer.
While security clearances for all other entities interested in bidding for Phase III Radio frequencies have been passed, the head of an FM station, speaking on condition of anonymity, said that assurances have been given by the Government to all Radio players that Phase III auctions would be wrapped up in July, irrespective of the status of Sun Group’s two operators.
But, it seems unlikely that the Sun Group, which operates the largest private FM network in the country, will take this lying down and it may resort to legal means following an unfavourable decision. The company could ask the court to stay auctions until the matter is sorted out, and if this does happen, then the Radio Phase III auctions would be further delayed. In another move, the MHA has asked the MIB to move the case file back to the Home Ministry for a fresh review. An MHA official stated that the promoters of the Sun Group faced serious charges of money laundering and corruption, and that it was a threat to the economic security of the country. “Our domain is to extend security clearance and the case examined by us clearly states that the owner of Sun Group is facing serious charges, including that of money-laundering, which affects the economic security of the country. In such a situation, the Ministry cannot give security clearance. Now it’s up to the Ministry of Information & Broadcasting to make a decision first (moving the file back to the Home Ministry for fresh review) and then we will see,” a Home Ministry official said in a media report.
AIN’T NO SUNSHINE ANYMORE
The Sun TV Network has been at the top of the game in Tamil Nadu both in terms of ratings, viewership and loyalty from the consumer. The Sun Group is also in a strong position in Karnataka, with Udaya TV in the Kannada market, Gemini in the Telugu-speaking markets and Surya in the Malayalam space, positioned just behind the leader, Asianet. With these four States together accounting for one-third of the Group’s advertising revenues, we will have to wait and watch if brand Sun is affected or not. “Sun is a strong brand in South India and has built a strong loyalty connect with the viewers. While the stock has been unpopular and financial investors may stay away from the stock, impacting its valuation, it is unlikely that Sun’s core viewers will migrate to other channels,” a media expert says.
Shankar B, CEO of Fourth Dimension Media Solutions, and a keen observer of media in South India, says, “The brand is strong and evokes strong emotions both among consumers and advertisers, so there is no reason for anybody to fret. I don’t think the current issue will have any impact on the advertiser or consumer. An advertiser needs an audience, a consumer doesn’t care what is happening at the company level; so nothing will change in terms of advertiser or consumer.”
However, he adds that while brand Sun is still shining with 1200-1300 GRPs, the gap between Sun TV Network and the rest is narrowing, since others are also doing well. “Sun is clearly the market leader, but the kind of response they used to get from advertisers five to seven years ago is no longer there. While others are doing well, sadly, nothing has changed at the Sun Group. It has stopped reinventing itself,” Shankar adds.
While the fog of ambiguity still hovers over the Sun-MHA tussle, the MIB has still not issued any date for the long-delayed Phase III Radio auctions. However, at the time of going to print, sources indicated that a decision is likely to be reached soon and a compromise could well be in the works.
CONTROVERSIES GALORE
Controversy and the Sun Group seem to go hand-in-hand. From allegations of using their cable and distribution arm to gain monopoly and scuttle the growth of other players, contentions of political vendetta, to relationships turning sour with Karunanidhi’s family when Dinakaran, the newspaper run by Kalanithi Maran, projected M K Stalin, the second son of Karunanidhi, as a future leader and heir apparent in an opinion poll over his elder brother… While the relationship with the DMK has turned for the better, the Marans are not so strong on the political front, with BJP at the Centre and arch-rival J Jayalalitha as Chief Minister in Tamil Nadu. Here are the three on-going cases against the Marans that are at the centre of the storm on the basis of which the Home Ministry is holding back security clearance to the Sun TV Network.
THE AIRCEL-MAXIS EPISODE
This dispute can be traced back to the 2G spectrum scam and involves Sun Group promoter Kalanithi Maran and his brother, Dayanidhi Maran – the former Communications & IT Minister in the Rs 540 crore Aircel- Maxis case being investigated by the CBI. The owner-cum-entrepreneur of Aircel, C Sivasankaran, sold 74% stake in the Telecom company to Maxis, a Malaysian company owned by T Ananda Krishnan. In April 2011, Sivasankaran complained to the Central Bureau of Investigation (CBI) that Maran had pressured him to sell his stake to Maxis. The Supreme Court asked CBI to investigate the role of the then Telecom minister Dayanidhi Maran, who resigned from the Union Cabinet in April 2011.
ED ALLEGES MONEY-LAUNDERING
The Enforcement Directorate (ED) is also probing the Sun TV Network on charges of alleged money-laundering to the tune of Rs 550 crore in the Aircel-Maxis case. This is seen to be one of the reasons why the MHA has been reluctant to give security clearance, as it claims that it could have an adverse impact on the ‘economic security’ of the country. It has been alleged that kickbacks from the Aircel-Maxis deal were received by South Asia FM Ltd (SAFL), which runs the radio channels Red FM and Suryan FM. ED also claims that the kickback was used for investments and other businesses and part of the assets attached by ED are owned by SAFL, a subsidiary of Sun TV Networks Ltd (it owns 60% stake in SAFL).
ILLEGAL TELEPHONE EXCHANGE
This also dates back to the time when Dayanidhi Maran was the Telecom Minister. It is alleged that an illegal telephone exchange with 300 high-speed telephone lines was set up in the Minister’s home, and then extended to his brother’s channel and thus the unlawful gains are expected to be over Rs 400 crore.
Feedback: simran.sabherwal@exchange4media.com
