MSM to pay BCCI facilitation fee of Rs 425 crores

The BCCI and MSM Satellite (Singapore) Pte. Ltd (MSM), the broadcasters of the IPL, have restructured their media rights agreement in order to recover the Rs 425 crore facilitation fee that MSM paid to World Sports Group (Mauritius) as compensation for WSG relinquishing the telecast rights for the Indian subcontinent before the second season of the league in 2009.

"Today, the governing council of the IPL had approved an amended Media Rights Agreement with MSM Satellite (Singapore) Pte. Ltd in which MSM would agreed to pay the balance payable under the Facilitation Fee Agreement to the BCCI," the IPL said in a release. "Thus, they have agreed to pay Rs 300 crores as part of the rights fee to BCCI. MSM Satellite (Singapore) is taking steps to recover Rs 125 crores already paid to WSG Mauritius and on recovery, will pay the same to BCCI."

The new agreement was signed at the IPL governing council meeting in Mumbai earlier today. In a statement of its own, MSM said "the BCCI has disclosed certain facts, hitherto not known to MSMS that confirm that the broadcast rights were exclusively with it (the BCCI) immediately prior to and at the time of the grant of the rights by BCCI to MSMS." The board had repeatedly said it had no prior knowledge of the facilitation fee agreement and called the fee an "improper payment".

MSM also said it has filed suit in the Bombay High Court to recover the Rs 125 crore it has already paid WSG and that it "categorically denies any impropriety in making the initial payments to WSG relying on representations made to us at that particular point in time."

In a statement emailed to Cricinfo, WSG said it was "surprised" by the board's decision and defended the legality of the facilitation fee agreement. "WSG reiterates that the contracts being referred to are above board as far as its involvement and obligations are concerned. We are not aware of and not party to the arrangements reached between MSM and BCCI and we will defend any claims which may be made by MSM against us."

The facilitation fee arose out of the restructuring of the television rights deal following the first IPL. WSG India had originally bought the worldwide telecast rights of the IPL for ten years (2008 to 2017) at a cost of over $1 billion. Meanwhile MSM had secured the rights to broadcast in India for five years (2008 to 2012) and had the option of securing the rights for the remaining five years (2013-2017) by paying WSG an option fee of $25 million. If MSM chose to exercise its option, WSG would in turn have to pay the BCCI $35 million at the end of the fifth year.

However, the board cancelled the original rights deal in 2009 and renegotiated its deal with WSG Mauritius. On its part, MSM did not want to renegotiate with WSG, wanting a direct contract with the board instead. The result was that MSM eventually negotiated a deal with the BCCI for the same price and duration as WSG Mauritius, in lieu of WSG Mauritius relinquishing its rights. The nine-year deal was worth Rs 8200 crores.

Because WSG stepped aside, MSM now owed it the facilitation fee, which consisted of the option fee of $25 million (Rs 115 crores approximately) to extend the rights from 2013 to 2017 and an additional fee of Rs. 310 crores payable over the nine years of the contract compensating WSG Mauritius for returning the rights it acquired from the BCCI. The $35 million potential rating incentive, payable at the end of the fifth year under the original agreement, was eliminated.

The facilitation fee had also attracted the attention of the Income Tax department, after it was alleged that no tax was levied on the transaction. At the time, MSM said the "payments made to BCCI and WSG Mauritius have been in accordance with applicable laws and as per established international cross border banking norms and procedures. MSM received tax advice from external tax experts that the transaction with WSG Mauritius did not attract India taxes and MSM has accordingly not withheld any Indian tax."