In what is being regarded as a breakthrough in China's regulatory system on telecom and broadcasting networks, China Mobile Limited, the world's largest mobile operator, yesterday acquired almost 20 percent of Phoenix Satellite TV Holdings Limited from News Corp. The three companies involved signed deals in Beijing yesterday.

 

China Mobile will get 19.9 percent stake in Hong Kong-based Phoenix from the flagship company of media tycoon Rupert Murdoch while the latter will reduce its holding in Phoenix to 17.6 percent.

 

Following the acquisition, Liu Changle, chairman of Phoenix, remains the biggest shareholder with 38 percent of the company followed by China Mobile and News Corp.

 

The parties declined to reveal the financial details although previous reports in Hong Kong said the deal was worth HK$1 billion (US$128 million).

 

Trading in Phoenix shares was suspended yesterday because of the announcement but before that the price had risen by almost 3 percent to HK$1.46 (19 US cents). The price has gone up by more than 20 percent in the past four days. China Mobile's share price dropped by almost 4 percent to HK$40.10 (US$5.14) yesterday.

 

"It's a good development for every player in the market and the deal itself already means a breakthrough in the regulation of the broadcasting system," said Li Yifei, president of MTV China. MTV come under another US media giant Viacom which competes against News Corp in China and formed an alliance with China Mobile last year.

 

Under current regulations, mainland telecoms and broadcasting network operators can carry out either telecoms or broadcasting operations--but not both.

 

Although both China Mobile and Phoenix are based and listed in Hong Kong, the overwhelming bulk of their business revenue comes from the Chinese mainland.

 

China Mobile also formed alliances with Phoenix, News Corp and the Star Group which is News Corp's major operation on the Chinese mainland.

 

China Mobile will develop and distribute multimedia content from the three broadcasters on its network which has 265 million subscribers. The mobile operator will also have preferred usage of Phoenix's news and other selected programs and Phoenix will have preferred access to China Mobile users.

 

The move is believed to be a major part of China Mobile's preparations to launch the third generation (3G) mobile system which will have a broader bandwidth and be suitable for transmitting content such as music and video.

 

China has yet to release 3G licenses but China Mobile is tipped to be in the running for one.

 

However, it may not be plain sailing as mobile broadcasters are required to be licensed from the State Administration of Radio, Film and Television and it's extremely difficult for telecom operators to secure such a license.

 

News Corp, which is said to be dissatisfied with the regulation of its Star TV in China, hinted in February that it would sell its stake in Phoenix. It's now successfully reduced its share in the company while forming an alliance with China Mobile.

 

Glenda Yu, a media analyst with BOC International, said the deal would have a minimal impact on the secondary market.

 

The short-term benefit for Phoenix will also be minimal at a time when mobile broadcasting remained a small segment of the market which faced uncertainties over regulations relating to it. But Yu believed that China Mobile's acquisition of a stake in Phoenix was just the start of a wave of buying.

 

Andes Cheng, Hong Kong-based telecom analyst from South China Research Ltd, also believed that China Mobile may increase its holding in Phoenix in the future.

 

(China Daily June 9, 2006)