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* Indian press frets over independence after acquisition
* Reliance buys up one of country's leading media groups
* Conglomerate denies meddling in editorial affairs
* Tensions re-surface during election-related coverage
By Krista Mahr and Sumeet Chatterjee
NEW DELHI/MUMBAI, Aug 3 (Reuters) - Just before Indian conglomerate Reliance Industries Ltd completed a deal to take control of media group Network18 Media & Investments Ltd in early July, two top editors stepped down.
In farewell letters to staff, both mentioned press freedoms.
Neither linked their decision to the change in ownership, but news of their resignation prompted heated debate over the significance of one of India's most powerful companies buying up some of the country's leading newsrooms.
On July 7, the Independent Media Trust, of which Reliance is sole beneficiary, completed the acquisition of control of Network18, home to news channels CNN-IBN and CNBC-TV18, Forbes India and firstpost.com, among others.
"Editorial independence and integrity have been articles of faith in (my) 26 years in journalism and maybe I am too old now to change!" wrote one of the two, Rajdeep Sardesai, who was editor-in-chief of IBN 18 News Network, including CNN-IBN, a respected English-language news channel.
On July 21 another editor, Nikhil Wagle, of regional channel IBN-Lokmat which is part of the same group, also resigned, complaining to Reuters of persistent editorial interference by the new owners.
"Every day you can find some example of interference by Reliance - direct interference in news," Wagle said. "They don't send any mail. They give oral instructions. They give hints."
Reliance said it did not interfere in editorial decisions.
"There has never been contact between Reliance and journalists of Network18," a spokesman said in an email.
The two other editors declined to comment for this article.
RELIANCE LOOMS LARGE
The hand of big business in India's media, as in other parts of the world, is nothing new.
But few private firms loom as large as Reliance, India's third biggest company by market value and an industrial juggernaut owned by the nation's richest man, Mukesh Ambani.
Ambani, like other prominent members of India's business community, has been a supporter of Narendra Modi, India's recently elected prime minister who stormed to power on the back of promises to kickstart economic growth.
Reliance's takeover of Network18 raised concerns that the new ownership might result in a bias towards Modi and his Bharatiya Janata Party (BJP) in its news outlets' coverage.
The company's track record of issuing legal notices related to defamatory content to the media amplified broader unease that reporters were being exposed to powerful backers' whims and that self-censorship was on the rise.
CNN-IBN and other Network18 outlets remain among the most esteemed news brands in a country with a vast and lively press.
They now share the challenge faced by news organizations around the world that cover large companies or powerful individuals who own them.
Such acquisitions do not necessarily hamper journalistic independence, some experts argue.
"The U.S. media is in a small number of hands, and still produces the best journalism," said Nikhil Moro, outgoing associate journalism professor at University of North Texas.
In an email to Reuters, a Reliance spokesman said the firm will seek to protect "the credibility of all news networks."
But some former and current Network18 journalists say Reliance's influence in the newsroom has already been felt.
INSTRUCTIONS FROM MANAGEMENT - SOURCES
Days after the deal, when Amit Shah, a close ally of Modi, was appointed head of the BJP, instructions from Network18's new management to steer coverage away from criminal charges pending against him passed between senior members of the network's newsrooms, two sources said.
Reuters could not independently verify the instructions or precisely how they were communicated.
Shah has denied charges of murder in connection with the 2005 killing of a man police said was an Islamic militant on a mission to assassinate Modi, as well as the deaths of his wife and a witness.
Umesh Upadhyay, recently appointed president of news at Network18, strongly denied suggestions that the group's journalists are pressured to act against their own judgment.
A veteran journalist who has worked at several major news outlets in India, Upadhyay's last job was a short stint as media director at Reliance.
"What happens in a newsroom is a sacrosanct editorial function," he told Reuters. "Network18 is a very solid news organization. I am very proud of the teams that are working there."
Some former staffers said they saw the company's hand in decisions on news coverage as far back as 2012, when Reliance invested in Network18.
Tensions surfaced at CNN-IBN during the run up to the April and May elections that brought Modi to power. Two ex-employees said there was pressure on coverage of the Aam Aadmi Party (AAP) and its leader Arvind Kejriwal, who had recently launched an attack on Reliance chairman Ambani.
Kejriwal failed in his bid to enter parliament, losing out to Modi. But as Delhi's chief minister, he had ordered an investigation into Ambani and policymakers over alleged corruption related to artificially inflating gas prices. The company has called the allegations "baseless."
"We used to be told that we needed to tone down (AAP coverage)," said a former CNN-IBN employee, who nevertheless acknowledged that he felt some of the network's coverage did lean too far in favour of the young party.
After being told not to air AAP press conferences, he said he started avoiding them altogether.
"The character of the newsroom started changing. You could feel a sense of helplessness from the editors."
The company denies giving instructions to journalists about how to cover AAP. A Reliance spokesman said the issue came up at a recent Network18 meeting.
The company's response was a "gentle suggestion that editors should exercise due diligence as per law of the land and be mindful that wild accusations of Mr. Kejriwal, when played live, trigger deep professional responsibilities," he said.
Reliance did, however, send a pre-emptive legal notice to Network18 in April about an interview with Kejriwal during his election campaign anchored by then-editor-in-chief Sardesai, warning against airing defamatory content.
"Reliance has a global reputation to protect among our millions of shareholders... and we will continue to spare no efforts to ensure that," the spokesman said. "We are believers in fair journalism."
SEARCH FOR NEW INVESTORS
Television networks expanded rapidly during India's boom years at the start of the millennium, but revenues were hit hard by the global economic crisis and financially fragile companies started to search for new investors.
Under a third of about 400 news channels have made a profit, according to bankers and sector officials.
Reliance's made a major investment in Network18 in 2012, when the media group and its subsidiary TV18 Broadcast Ltd faced serious financial problems.
The intervention provided much-needed cash to Network18 and its founder and former managing director, Raghav Bahl.
Reliance, a conglomerate with interests in energy, textiles and retail, has said the Independent Media Trust took control of Network18 to acquire content for 4G telecoms services it plans to roll out next year.
As well as business channel CNBC-TV18, CNN-IBN, IBN-Lokmat and Hindi news channel IBN7, it is also home to many non-news properties, like HomeShop18 and bookmyshow.com.
Bahl, who has resigned from Network18 and is now a non-executive member of the board, said Reliance never interfered in editorial operations while he was in charge.
"All decisions, right or wrong, were ultimately taken by me," he wrote in an email to Reuters.
"I am more than certain that N18 will continue to operate on the principles of sound, credible journalism." (Editing by Mike Collett-White and Frank Jack Daniel)