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Sean Kennedy

RUPERT Murdoch's latest adjustment to the broadcasting firmament has analysts and News Corp watchers scrambling to fathom his decision to pay US$299 million for 36.4 per cent of STAR TV.

News Corp also took over shareholder loans made by Genza - wholly owned by Richard Li Tzar-kai, son of Li Ka-shing - and Hutchison to STAR TV, adding another $46 million to the price in a deal scheduled for completion last Wednesday.

  News Corp first bought into STAR TV in July 1993, paying $525 million for 63.6 per cent, half in cash and half in shares.

  'This transaction is a continuation of the July 1993 transaction,' a STAR TV spokesman said when the purchase of the remaining 36.4 per cent was announced.

   'It enables STAR to exploit all the natural synergies that are part of the News Corp group.'   These include access to the corporation's Fox network in the United States and BSkyB, its satellite broadcaster in Britain.

  One STAR TV insider said Mr Murdoch might turn around and offer a small part of STAR TV to someone else desperate to get into the Asian market as the first step en route to an initial placement offer.

  'Time Warner likes taking minority stakes in businesses,' he said.

   'They may well want to take a small stake in STAR.'  STAR's value would be increased after the launch of a new satellite increased its channel numbers, but the decision by Li Ka-shing and his son to sell was timely.

 'I think Li Ka-shing got a brilliant deal but Murdoch's got a brilliant future,' the spokesman said.

  About half of the programming for STAR already came from Murdoch-owned suppliers.

  'We're not paying for it,' he said.

   'Well, we are, but it's one hand paying into the other hand.'   David Kelly, media analyst with McIntosh Baring in Sydney, said he had recently asked News Corp if it planned an IPO for STAR TV and was told it was not planning a flotation.

 But that was 'what you'd expect them to say,' he said.

   'It makes sense. That would be similar to what they did with BSkyB [in Britain].'  STAR TV was not making a profit mainly because of the money being spent on new markets.

  'I understand that if they wanted to declare a profit, all they have to do is scale back their development work,' Mr Kelly said.

  He said that the Philippines and Taiwan operations were already well in the black.

  STAR TV is making inroads in a part of the world that others are desperate to penetrate, and is aware of efforts by networks like the United States' National Broadcasting Co (NBC) to gain a toehold in the region.

  NBC is reportedly wooing Television Broadcasts (TVB) and/or Shaw Brothers.

  'They're all paranoid that they're going to miss out on Asia,' said the STAR TV insider.

  'The interesting thing about TVB is it's only a China play and we haven't been able to make money out of China. Taiwan, yes. China, no.'   TVB's only advantage was that it had an income stream, he said.

  But STAR's revenues were improving, he said.

  While News Corp was sitting on a pile of cash and the $345 million price tag for STAR - $299 million for equity and $46 million for loans - was 'not that much in the overall scheme of things, about four to five months of News Corp's annual profit.

  Plus, the Middle East, India and Indonesia were going well for STAR TV, he said.

  This was particularly so in India, according to one Sydney-based Murdoch-watcher who declined to be named.

  He said News Corp had already been approached by US investment bank Salomon Brothers which said it could raise $1 billion by floating only the Indian part of the STAR TV broadcasting 'footprint'.

  Another analyst said he believed Mr Murdoch wanted to gain complete control of STAR TV for two reasons: first, he wanted a completely free hand in developing operations regionally; and, second, he wanted to take on joint venture partners on a market-by-market.

  'A minority shareholder [like the Li family] might have had vested interests or conflicts of interest,' the analyst said.

  A Sydney-based media specialist agreed.

   'I could certainly see a situation where bits of STAR are floated off on local exchanges with News Corp running the whole as a master franchisee so it still controls the basic product going out,' he said.

  He said STAR might have to wait for two to three years to establish a track record of profits, but a flotation was definitely feasible, and STAR was definitely profitable.

  He is forecasting operating profits for STAR TV of $1.1 billion by 2000.



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