i-Cable shares plummet by almost half to one-year low as Wharf set to halt funding

i-Cable Communications shares plunged as much as 46 per cent to a one-year low, after its owner Wharf (Holdings) said yesterday it will exit the unprofitable business of providing pay-television and broadband internet. i-Cable shares, of which Wharf owns 73.8 per cent, slumped on Friday morning amid surging turnover. The shares price at one stage touched 50 HK cents, the lowest level seen since March 9 last year. Wharf’s shares jumped as much as 10 per cent to HK$68.5, the highest level in more than three years. Hong Kong Television Network jumped 5.7 per cent to HK$1.5. Television Broadcasts Limited (TVB) shares dipped 0.5 per cent to HK$33. Wharf could not find a buyer for its struggling i-Cable Communications unit, according to a statement released yesterday. Funding to i-Cable, which reported a HK$313 million loss last year, will not be extended upon expiry, Wharf said. “The possibility to see i-Cable turning around is low,” Wharf’s chairman Stephen Ng Tin-hoi said during a Thursday press conference. “We have tried very hard to talk with many investors, but no one intended to buy.” Wharf, Hong Kong’s largest retail landlord, is redirecting its focus on property, which contributed to the 25 per cent increase in its 2016 earnings. Ng, who also serves as i-Cable’s chairman and chief executive, said i-Cable will hire a financial adviser to review and find a strategy for its future. “For now, we can’t answer whether i-Cable will close down. All decisions will be subject to the assessment by the future financial adviser,” he said. “First, we will see if we can find other financial support. If not, we will see if the company’s business can continue.” Failure to obtain fresh funding, however, is likely to lead to its closure. The Office of the Communications Authority said i-Cable must fulfil its financial responsibilities before its pay-TV license matures on May 31. The industry watchdog said i-Cable will forfeit the HK$13 million deposit it paid for the new free-to-air terrestrial TV license of affiliate Fantastic Television if it fails to meet the licence requirements. The government renewed i-Cable’s pay-TV licence for 12 years to 2029 in December, which requires HK$3.4 billion in investments for the first six years. Fantastic TV has also committed HK$660 million in content and capital investments in the first 18-42 months of its operations since obtaining its licence in May last year. “We have three [broadcast] licenses, including the new one to be awarded by the government,” Ng said. “We are now considering whether or not to accept the new license and how to deal with the existing licenses.” Fantastic TV has been preparing to launch its free-to-air Cantonese channel in May this year. The pay-TV and broadband internet services provider still has up to HK$400 million of funds from Wharf Finance from a December 2016 agreement. Wharf had committed HK$229 million to i-Cable’s total capital and development expenditure as of December 31, according to the company’s data. The former Hong Kong Cable received its first 12-year license to operate pay-TV service in Hong Kong in June 1993. The service was renamed i-Cable in 1999 after launching its multimedia services business for dial-up internet access. The service, with 2,176 employees on staff, is all that remains of Wharf’s communications, media and entertainment operation, Ng said. Wharf sold its Wharf T&T fixed-line telecommunications business to private equity firms MBK Partners and TPG Capital for HK$9.5 billion in cash last October. “The problem is i-Cable did not make full use of the advantage with its fibre optic broadband network,” said Grace Leung Lai-kuen, a professor in media regulation and policies at Chinese University. “It’s supposed to have a good platform but it could not attract as many subscribers as the Hong Kong Broadband Network. HKBN had a better strategy so i-Cable lost subscriptions to its broadband and TV services, despite its synergies.” The pay-TV service is run by the Hong Kong Cable Television unit, which produces more than 10,000 hours of programming each year. “There may still be interest in i-Cable because it has content on its books, just like TVB,” Bocom International’s analyst Alfred Lau said last month when Wharf was still working with Goldman Sachs to find a buyer for i-Cable. Net loss for i-Cable widened to HK$313 million last year, on the back of a 7 per cent decline in total revenue to HK$1.4 billion, dragged down by deteriorating advertising amid a retail slump in Hong Kong. The introduction of free-to-air television, such as the Cantonese Viu TV launched last March by PCCW’s HK Television Entertainment, has added to i-Cable’s financial woes. It’s not alone in facing the crunch. Asia Television, the world’s oldest Chinese-language broadcaster, went off the air in May last year, ending 59 years in operation. Hong Kong’s television industry has also changed considerably, as set-top video-streaming services like Leshi and Netflix recently launched their operations. Television Broadcasts (TVB) in January scrapped its pay-TV business TVB Network Vision, shifting it to a set-top service, after raking up HK$2.2 billion in losses. Additional reporting by Danny Lee