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Ben Kwok

Stephen Seawright

Rupert Murdoch's Star TV has scrapped plans to launch a pay-TV service in Hong Kong, raising questions about government proposals to liberalise the industry.

The Government announced yesterday that only four operators had decided to go ahead with domestic pay-TV licences. Originally five firms had been granted licences but DTV - a wholly owned subsidiary of Star TV -  decided not to proceed with its application.

Star TV - media giant News Corp's Asia satellite TV broadcaster and multimedia unit - issued a statement confirming that the company had deferred plans to start a direct-to-home pay-TV platform in Hong Kong. It gave no reason for the move.

But analysts speculated that Star TV believed the SAR market would be too competitive, with too many operators chasing too few viewers.

Star TV spokesman Jannie Poon Lai-king said: 'Profitability of the Hong Kong market depends on how many players will be in the market.

'After assessing the Asia Pacific market, we concluded that what was best for us at this point was to concentrate on being a content provider.'

The withdrawal of Star TV, which originally planned to invest HK$248.9 million in Hong Kong's pay-TV business, would drastically reduce investment in the industry from HK$700 million to HK$451.1 million.

The number of new channels to be launched by pay-TV licence holders would be reduced to 135 from the four formal licence winners, down from the original 149 by the five applicants.

However, the Government dismissed fears that Star TV's retreat was a blow to Government plans to liberalise the industry.

'We made it very clear that we do not set a ceiling on the number of licences to be issued or a target for the number to be issued,' said principal assistant secretary at the Information Technology and Broadcasting Bureau (ITBB) Eddie Mak Tak-wai.

'From the Government's viewpoint we believe it is for the market to decide, particularly because our existing broadcasting policy encourages competition.'

A Government spokesman said new licences could be issued at any time but so far no fresh applications had been received.

No penalty would be imposed on Star TV as it was the company's own commercial decision, according to a spokesman for the ITBB.

The four pay-TV licences granted include one to Galaxy Satellite Broadcasting, a subsidiary of TVB. This has led to fears about unfair competition because of TVB's dominant position in the market.

The other licences went to Hong Kong Network Television, owned by Internet content provider Sino-i.com; Elmsdale, a British firm that owns Yes Television; and Pacific Digital Media (HK), a Taiwan-backed company.

They will join existing industry companies i-Cable and ITV, former HKT's video-on-demand unit.

Pacific Digital Media general manager Stephen Chan Tak-fai said he was surprised by Star TV's withdrawal, as the company was one of the largest players in the industry and had been very aggressive in its regional expansion plan.

However, he believed it was good news for other licence winners because it would reduce competition in the industry.

Galaxy Satellite Broadcasting general manager Stanley Tang See-tin: 'It is good news for us because Star TV is a major competitor with our future service.'

A spokesman for i-Cable Communications, the largest existing pay-TV station in Hong Kong said: 'We still have a positive view about this market.

'We have 500,000 subscribers and we are making money.'

Anne Ling, HSBC analyst, said: 'Content-rich player Star TV's decision to pull out of the market has been a surprise and has sent a negative signal to the market.

'That could imply a very difficult business model in the years to come.'

She said Star TV was unlikely to be the last company to pull out.



Star unit withdraws licence application as analysts raise questions of over-crowded, competitive market