Disney to buy Indian children's TV channel

LONDON/MUMBAI (Reuters) - Walt Disney Co. has agreed to buy Hungama, an Indian children's cable and satellite TV channel that broadcasts in Hindi, for $30.5 million as it tries to keep pace with rivals in the fast-growing market.

As part of the deal, Disney <DIS.N> said on Tuesday it would pay an additional $14 million for a 14.9 percent stake in UTV Software Communications Ltd. <UTVS.BO>, the diversified Indian media group that owns film and television assets, including Hungama via its United Home Entertainment unit.

"Television is and will continue to be the major growth engine in building franchise affinity in India," said Rich Ross, president of the Disney Channel Worldwide.

Disney, based in Burbank, California, already operates a Disney Channel and Toon Disney/Jetix in India, which reach 30 million homes on cable and satellite. Disney program blocks reach a wider audience on a terrestrial network.

Launched in September 2004, Hungama targets children aged 4 to 14 and programming includes such characters as Fireman Sam, the impish penguin Pororo and talking airplane Jay Jay.

Time Warner's <TWX.N> Cartoon Network had been a dominant leader in the Indian children's entertainment market, but POGO, Hungama and Disney have closed the gap in recent months, and each has about a one-quarter share.

"Disney is playing catch-up, and the only way it could do so was through an acquisition," said Atul Phadnis, head of consultancy Media e2e.

"It's a fast-growing space and has the potential to really explode if distribution improves," he said.

India has the world's third largest cable TV market reaching more than 65 million homes.

UTV said Disney would be issued 3.4 million shares of UTV Software Communications at 192.5 rupees each.

UTV's shares were down 4.2 percent at 167 rupees in Tuesday afternoon trading, off a high of 193 rupees. Disney shares closed at $29.37 on Monday.