The Tatas will buy an 80 per cent stake in Space Television, the company floated by Rupert Murdoch's Star group for its direct-to-home (DTH) television distribution business in India.

The remaining 20 per cent stake will be held by Star.

The Tatas' stake in Space Television would be held by Tata Sons, sources close to the development said.

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Confirming the development, senior Star executives told Business Standard that a formal agreement to this effect was likely to be signed in a month.

When contacted, a Tata group spokesperson refused to comment.

Star has informed the government about the Tatas' investment in Space Television and has said the company will start commercial operations by the middle of next year.

The government had invited Star to set up its DTH operations in June this year.

The venture will require an investment Rs 250 crore (Rs 2.50 billion), which will be brought in by the partners in proportion to their holding in the company.

According to the guidelines framed by the government, foreign investment, including that by Non-Resident Indians and foreign institutional investors, in a DTH venture cannot exceed 49 per cent of the paid-up capital of the company.

Also, a broadcasting or cable company cannot hold more than 20 per cent in the venture.

As per the policy, any company planning to set up a DTH venture will have to pay an entry fee of Rs 10 crore (Rs 100 million) at the time of applying for a licence, in addition to a bank guarantee of Rs 40 crore (Rs 400 million) for the licence period of 10 years.

This partnership with the Tatas comes soon after Star signed a deal with ABP Ltd, which acquired a 74 per cent stake in Star News.

According to sources, the DTH package of Space Television is expected to cost Rs 5,000 as installation charges.

The transmission of DTH signals of Space Television is expected to be from a foreign satellite to begin with and will be transferred to an Indian satellite with sufficient capacity later.

Space Television will offer about 100 channels through its DTH platform and its services will be modelled on News Corps' BSkyB satellite platform.

The company is also planning to offer high-end services like pay per view and video on demand.

Earlier this month, the government allowed the Subhash Chandra-promoted Agrani Enterprises to start its DTH venture in the country.