TV18 to merge ops of business channels; 12% layoffs on cards

With a view to align businesses and build operational synergy, media company Network18 said it would restructure operations of its flagship company TV18 India by merging broadcasting operations of two of its business news channels CNBC TV 18 and CNBC Awaaz. This move is expected to optimise 20% of annual costs and see 12% of its workforce being retrenched.

A senior executive of the company said this will translate into around 200-250 people being laid off. "Only some over-lapping and common operations at the back-end are being merged. The company expects to optimise approximately 20% in annual costs via this restructuring," a statement released to the Bombay Stock Exchange (^BSESN : 16012.52 -29.66) by the company said on Friday. The executive maintained that the two channels will continue to retain their individual identity.

The management expects this move to create one of the largest business news infrastructure across six business bureaus and two broadcasting hubs. This move, according to the company, will generate synergies and at the same time around 12% of its "permanent" staff will be rendered surplus.

"The company will take a one-time extraordinary restructuring charge in the current quarter, and the synergies are expected to result in savings from the next quarter," the company statement said. The move will lead to a savings in interest and operational costs and a reduction of approximately Rs 65 crore in costs annually. This, the management said, is being done as a part of commitment made in the rights issue to shareholders to reduce costs and repayment of Rs 300 crore worth of debt.

"It is our belief that the next stage of growth and profitability of our business news operations will come from a more synergistic entity that combines the strength of two powerful and complementary brands," Network18 Group CEO Haresh Chawla said.

According to industry watchers, this is one of the biggest retrenchment exercises seen by a media company in the past one year, which saw revenues and profits take a beating because of a sharp decline in advertising spends in the wake of the economic downturn.

Television 18 recorded a loss of Rs 26.25 crore for the quarter ended September 30, 2009, compared to a profit of Rs 1.20 crore in the same quarter last year. Shares of Television 18 closed at Rs 78.75 on the BSE on Friday, up 2.54% from its previous close.