The launch of Star News signalled what has been described as 'the next big phase in India's broadcasting history' - the rapid growth of privately owned satellite news channels in a market otherwise dominated by channels dishing out trashy soaps and serials.

Since early this year, four news channels have been launched in English and Hindi, India's national language. More are being planned to cater to regional audiences. The boom comes after the doubling of viewers for news channels last year, with revenues expected to grow to five billion rupees (HK$829.3 million) by next year.

'The interest in news has been generated by a variety of major international and Indian events, from the 9-11 attacks in the United States to the religious riots in India's Gujarat state,' said P.N. Vasanti, an analyst at New Delhi's Centre for Media Study, which has been tracking five Hindi news channels for the past three months.

According to a BBC estimate, by the end of the year India will have about 10 television stations dedicated to 24-hour news, 'far higher than any other country'.

'Understandably, Hindi news channels are leading the pack,' Ms Vasanti said.

Until Star News came on the scene, nearly two-thirds of the Hindi news viewership was with Aaj Tak, another newcomer in the field launched last year by the publishers of the weekly India Today.

But not long after its Hindi news channel was launched, Star India demonstrated that it could soon add leadership in the news segment to its already dominant position in entertainment television. The latest AC Nielsen ratings, for instance, show that Aaj Tak, though still the leader, now has only 37 per cent market share, with Star News a close second with 30 per cent.

But with the government seemingly committed to blocking foreign control of the news media, Star India, a wholly-owned subsidiary of Mr Murdoch's Hong Kong-based Star TV, faces a handicap. To get around a newly-introduced regulation limiting the foreign holding in Indian television news channels to 26 per cent, Star floated an affiliate, Media Content and Communication Services (MCCS), to run Star News and apply for a licence for the satellite uplink.

Indian investors were roped in to pick up 74 per cent of MCCS, with the largest stakes going to a Mumbai merchant banker and also to one of India's biggest industrialists, Kumar Mangalam Birla. But even before Star News was assured a permanent satellite uplink, Mr Birla exited in a hurry.

Other investors in India's highly competitive media business have learned the hard way that controversy and harassment engineered by vindictive politicians or business rivals are an assured part of the returns.

Mr Birla is rumoured to have been persuaded to opt out by an adviser from a nationalist Hindu group which is opposed to foreign holdings in media companies.

His sudden departure brought the entire shareholding structure of MCCS into question.

Describing it as a legal 'fiction', the daily Business Standard said that Star had parcelled out chunks of shares to Indian investors 'who were clearly not interested in running the show', allowing Mr Murdoch to retain control.

But as the paper pointed out, foreign companies in other businesses, such as the soft-drinks giant Coca-Cola, have also successfully circumvented government stipulations regarding shareholding.

Star News though is in a politically sensitive business that, in India, seems to make news almost as easily as it disburses it. Six Indian broadcasters, led by Aaj Tak and New Delhi Television, quickly made an issue of the MCCS shareholding, and demanded the government investigate the 'bypassing' of its own guidelines.

Major, family-owned Indian newspaper groups, concerned about possible future competition from foreign media barons such as Mr Murdoch, also jumped on to the anti-Star bandwagon.

'Star's stratagem of getting around the foreign equity rules for broadcasting can serve as a dangerous precedent for flouting norms and rules laid down for foreign investment in the print media,' The Hindu daily said. Foreign direct investment in news publications is also restricted to 26 per cent, but with the additional stipulation that 51 per cent must remain with a single Indian entity.

The controversy over its Hindi news channel appears to have opened a Pandora's Box for Star India. Questions are being raised about the valuation of MCCS (40 million rupees), and the status of two other companies that will provide studio and production infrastructure to the newly set-up media company. Nobody however expects Star News to go off the air.