One battle ends, and another one begins.

Pending regulatory approval, the last meaningful acquisition target in India’s non-Hindi TV markets – Telugu market leader Maa Television Network – is off the table, acquired by Star India for about US$400 million, about 10x revenues, according to estimates from Media Partners Asia.

In recent years, markets outside India’s Hindi heartlands, especially in the south of the country, have served as a key source of growth, profitability and competitive activity for the country’s major broadcasters. It will take at least another three to four years of continued growth for another regional entertainment channel to become big enough to catch their eye.

Maa TV was the last sizable independent, well positioned with four Telugu entertainment-oriented channels in India’s second-largest regional TV market. (Tamil is the biggest). 

A Telugu presence fills an important gap in Star’s regional portfolio, following a cycle of industry M&A that included Malayalam and Kannada specialist Asianet, also purchased by Star, and Eenadu TV (ETV), another Southern multi-language network taken over by Reliance-controlled Network18.

Now, competitive dynamics in regional markets will focus on organic growth, where access to funding, talent and IP will play a defining role.

Star has already enjoyed some success building regional channel businesses over the past five years, notably from the ground up to take leadership in the Bengali market, while enrolling domestic movie talent where it can, to burnish the appeal of its TV shows.

On this front, Telugu cinema or Tollywood, India’s second-largest movie industry after Bollywood, offers plenty of promise. Two to three new Telugu films are released each week, contributing a steady supply of premieres to drive viewership on Telugu TV.

Stepping up the competitive tempo however also requires fresh investment from Star, which has already spent almost US$5 billion landing key content and IP (including sports rights) over the past six years, according to estimates from Media Partners Asia.

This outlay has secured market leadership, putting Star in sight of US$1.7 billion revenues this year, while denting margins and profitability at the same time.

Reduced exposure to sports rights, as well as emerging revenues from digital TV and online video, should start replenishing the bottom line within the next two years.

Acquisition also closes down options for Star's main rivals, notably Sony, which had an unexercised 30% option on Maa TV and is lagging in the regional race.

A strategic play

Maa TV, on track for Rs 2.43 billion (US$39 million) revenue and Rs 860 million operating profit in FY14 (from reported 9M performance), may not move the needle by much but promises synergies as well as greater scale for Star.

Access to Maa’s library for example bolsters Star’s recently launched VOD service, Hotstar, a future revenue driver as video-capable broadband networks become more prevalent.

Star is looking to ramp up content output across its networks, as new online and digital cable distribution platforms create new real estate in Indian TV.

At the same time, Star has been localizing its sports properties as an additional stimulus for regional growth beyond movies and soaps, the two established ratings drivers for non-Hindi audiences.

The cricket World Cup, currently taking place in Australia and New Zealand, is being broadcast in six different Indian languages.

“Star paid a premium but Maa TV has a lot of strategic value and offers a lot of synergies with the Star network,” says Mihir Shah, VP of India for Media Partners Asia.

"It strengthens their regional portfolio – Telugu was the only missing link for Star in the bigger regional markets – but also helps Star's growth strategy for its sports business, as well as OTT," Shah adds.

"Maa TV has a very good library of movies. There's also a lot of demand for regional sports content in the Southern markets. Kabaddi, for instance, is a good fit."

A new mass offering such as sports can potentially break the competitive deadlock in markets operating on a smaller scale than Hindi channels, which account for 70% of TV viewing nationwide. 

Adex growth in the Telugu market in particular has been reined in by a closely fought competition between four lead channels: ETV Telugu, Gemini (run by Southern giant Sun), Maa TV and Zee Telugu. Maa TV is currently in pole position, after good momentum last year. 

“Owing to heightened competition, the growth in [Telugu] adex in 2014 was lower than overall All India adex,” notes Ravi Rao, South Asia leader for media agency Mindshare.

“There are over 40 local Telugu channels,” Rao notes. “Gemini used to be a market leader. However, Maa TV has done extremely well in the last year on the back of movies and programming.”