China Mobile Limited, the world's largest mobile operator, yesterday acquired almost 20 per cent of Phoenix Satellite TV Holdings Limited from News Corp, believed to be a breakthrough in China's regulatory system on telecom and broadcasting networks.

The three companies signed deals in Beijing yesterday.

China Mobile will get 19.9 per cent of 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 per cent.

After the acquisition, Liu Changle, chairman of Phoenix, will remain the biggest shareholder with 38 per cent of the company, followed by China Mobile and News Corp.

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

Trading of Phoenix shares was suspended yesterday due to the announcement, but before that the share price had risen by almost 3 per cent to HK$1.46 (19 US cents). The price has gone up by more than 20 per cent in the past four days.

China Mobile's share price dropped by almost 4 per cent to HK$40.10 (US$5.14) yesterday.

"It is 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, 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 operators 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 majority of their business revenue comes from the Chinese mainland.

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

China Mobile will develop, aggregate 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 programmes and Phoenix will have favoured access to China Mobile users.

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

China has yet to release 3G licences, 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 get a licence from the State Administration of Radio, Film and Television and it is extremely difficult for telecom operators to get one.

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 has 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 will have a minimal impact on the secondary market.

The short-term benefit for Phoenix will also be minimal at a time when mobile broadcasting is still a small area facing uncertainties in regulation.

But Yu believed that China Mobile's acquisition of a stake in Phoenix is 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 boost its holding in Phoenix in the future.

(China Daily 06/09/2006 page9)

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