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Ben Kwok

Government plans to liberalise Hong Kong's television industry have suffered a second blow after another holder of a pay TV licence said it no longer wanted to offer the service.

Hong Kong Network TV's (NETV) decision to change its plans makes it the second TV licensee to withdraw from the industry in the past three months.

In December, media tycoon Rupert Murdoch's Star TV scrapped plans to launch a pay-TV service in Hong Kong because it was worried about the profitability of the industry, with too many companies chasing too few viewers.

Last year, in an effort to liberalise the television industry, the Government granted licences to five new operators, in addition to the existing two.

Of the five players, only three say they will go ahead with their domestic pay-TV plans.

NETV blamed overcharging by network operators - the companies whose cables will carry the service - as one of the key factors in its decision.

NETV explained that the company could not find a viable business option for pay-TV transmission after 18 months of preparation.

'Carrier costs are incredibly high. There is no way that we can run a profitable business,' a source from NETV said.

The company - jointly owned by mainboard-listed Sino-i.com and movie star Jackie Chan - said it had failed to work out an agreed rate for its service after discussions with carriers Hutchison Global Crossing and Pacific Century CyberWorks.

A Global Crossing spokesman said its charges were 'reasonable'.

A CyberWorks spokesman declined to comment.

There are only two pay-TV operators in Hong Kong - Wharf Holdings' i-Cable and CyberWorks' iTV.

Of the new contenders, both Yes Television and Pacific Digital Media have said they would launch services to the public in August, giving TV audiences a choice of 30 to 40 new channels.

The remaining new licence winner, Galaxy Satellite Broadcasting - owned by existing free-TV operator Television Broadcasts (TVB) - will not be able to start for at least another year because the Government is worried about TVB having too great a share of the market.

Eddie Mak Tak-wai, Information Technology and Broadcasting Bureau (ITBB) principal assistant secretary, said the withdrawal of Star TV and NETV would not affect the Government's plan to liberalise the TV industry.

'Our policy is to open up the market. We do not determine how many operators there are in the market, but let the market decide,' said Mr Mak.

'Today, we see some players withdraw, maybe tomorrow there will be new players coming in.'

So far there had been no new applications submitted for domestic pay-TV licences, he said.

NETV's withdrawal means it faces a penalty and the Broadcasting Authority is reviewing its licensee obligations and seeking legal advice, according to Mr Mak.

As a pay-TV licensee, NETV was due to pay a HK$44 million performance bond last week.

The three remaining new licence owners have committed to invest about HK$310 million to roll out 70 new channels.

This represents a more than 50 per cent cutback from the original investment commitment by the five operators last July.

Both Pacific Digital Media chief operating officer Charles Yang and Yes Television chief executive Randall Cox said consolidation in the industry was expected.

Analysts said that the withdrawal of Sino-i.com was not unexpected, as industry experts had noted the company was not actively involved in hiring or launching activities.

'I would say its [NETV's] impact is minimal, as the pull-out of Star TV had already signalled it was a very difficult market,' said Marisa Ho, Credit Suisse First Boston analyst.

'It will make more sense for operators to quit before they are committing more to the market.'



NETV becomes second pay-television licence holder to quit, citing overcharging by network operators as key factor