08 June 2006

News Corp sells Phoenix TV stake to China Mobile
By Judy Hua and Doug Young
Reuters News
(c) 2006 Reuters Limited

HONG KONG/TAIPEI, June 8 (Reuters) - Rupert Murdoch's News Corp. will sell a 19.9 percent stake valued at $185 million in a China-focused TV broadcaster to the parent of China Mobile Ltd., in a setback to its ambitions for the country's tough media market.

After the transaction, News Corp's STAR Group Ltd. would retain 17.6 percent of broadcaster Phoenix Satellite Television, the companies involved said in a statement. The stake has a market value of US$185 million based on its shares' last close.

Analysts said the deal underscored Beijing's apparent attempt to limit foreign firms' operations in the sensitive media industry and News Corp.'s efforts to circumvent that, while at the same time potentially heralding similar deals.

By giving up part of its stake, News Corp. wins a powerful mobile services partner that can provide an alternative platform for delivering content. China Mobile wins programming that it can feed to its 265 million users.

The Chinese market "has always been tough," said Vivek Couto of Media Partners Asia Ltd. "News Corp. is trying to be a bit more imaginative in trying to forge ahead. They have to look for solutions.

"It's an interesting development. ... Maybe it sets in motion more deals like this, where mainland Chinese companies will be buying more Hong Kong media assets in the future," he added.

Media giants have long eyed a Chinese advertising market worth 243.9 billion yuan ($30.43 billion) in 2005, up 18 percent from 2004.

But the decision by News Corp. to unload part of its Phoenix Satellite stake comes as Beijing appeared to have backtracked on moves toward liberalisation of the sector in recent years.

Chinese regulators have effectively slapped a ban on new activities by foreign media, industry sources say, declining to approve new broadcasting rights and also applying the brakes on an earlier-announced initiative to let overseas firms create joint ventures producing programming content.

Rival Time Warner sold its controlling stake in its own Chinese channel, CETV, to Hong Kong's Tom Group a few years ago.

SCUTTLING DEALS

Though based in Hong Kong, Phoenix Satellite TV is recognized across mainland China as a snazzier alternative to government-controlled news programmes.

Its shares were suspended before the start of trading in Hong Kong on Thursday. They were up nearly 18 percent in the past two weeks to end at HK$1.46 on Wednesday.

Stock in China Mobile, the world's largest cellular operator by subscribers, slid 3.7 percent to end Thursday at HK$40.10.

Beijing has not decided when third-generation telecoms network licences will be issued, but telecoms operators have said they are preparing for the technology. (Additional reporting by Donny Kwok) (US$=HK$7.8)