Industry sources said the regulator's carefully calculated negotiating strategy was aimed at giving it a precedent as possible talks with TVB, Hong Kong's dominant broadcaster and also the most popular channel in the Pearl River Delta.

Phoenix chairman and chief executive Liu Changle told the South China Morning Post his company would be allowed to keep 70 per cent of all Guangdong advertising revenues raised through a recently established joint venture with GDARFT's Guangdong Television Broadcasting Development Centre.

Industry sources estimate that the agreement could generate an additional 50 million yuan in Guangdong advertising revenues for Phoenix this year, as local cable operators will no longer be allowed to edit - or 'splice' - in their advertising over Phoenix's.

Mr Liu said GDARFT was willing to give Phoenix a relatively large portion of the joint venture's advertising sales because, as a Mandarin-language channel in a predominantly Cantonese-speaking province, it had a low market share and local cable operators did not earn much money from editing out the broadcaster's advertisements and replacing them with their own.

According to Mr Liu, GDARFT and local cable operators have little to lose in giving Phoenix a big piece of a small pie. 'They're not sacrificing that much.'

Mr Liu believes Phoenix's ratings share in the Pearl River Delta, with its estimated 45 million cable TV households, to be just 2 per cent.

Industry sources say that ATV and TVB, buoyed by their popular Cantonese channels, enjoy shares of anywhere between 8 per cent and 20 per cent for ATV and 26 per cent and 35 per cent for TVB.

With much more at stake in its negotiations with ATV, the GDARFT is playing hardball.

'I don't think [ATV's deal] will be able to match Phoenix's,' said Mr Liu, who is also ATV's largest shareholder. This was because local cable operators had more to lose.

'Therefore it is impossible to apply Phoenix's deal structure to ATV and TVB's negotiations.'

Mr Liu would not be drawn on the details of ATV's negotiations. But, according to one well-placed industry source, GDARFT wanted to make sure local cable operators would get at least as much as at present from splicing their adverts into ATV's programming. The regulator would be willing to share anything above that with ATV, but only on lower terms than those obtained by Phoenix.

While ATV chief executive Chan Wing-kee would also not be drawn on specifics, he said 'we are very close to a deal'.

'Our principle is, we want Guangdong to make more money than it did in the past while we enjoy a satisfactory profit. We want a mutually beneficial win-win situation.'

GDARFT director Yan Xianqi was not available for comment, and other officials reached at his office declined to answer questions.

Unlike Phoenix, which secured Guangdong landing rights in October 2001 and ATV, which got them in August last year, TVB does not have formal rights to broadcast into the province.

The station is therefore not in a position to negotiate an advertisement-share agreement with GDARFT.

TVB assistant general manager Stephen Chan Chi-wan said: 'Landing rights alone are meaningless.

'What really matters is the sharing of ad revenues.'

It is no accident that TVB has been forced to sit anxiously on the sidelines while Phoenix, and then ATV, were granted landing rights in Guangdong and invited to negotiate advertising-share deals with GDARFT.

An industry executive said: 'The Guangdong authorities are very smart - they're setting a precedent for TVB.'

Graphic: ptv17gbz