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ASIA TELEVISION (ATV) has finally come up with some prime-time viewing. A company with a chequered past, a politically connected boss, boardroom intrigue, and a race to dominate a billion-dollar market.

There has even been a sub-plot involving Hong Kong's richest man and a botched bid to buy into the company.

Unfortunately, the drama is all off-screen. The thread has been a confusing one to follow. However, events of the past few months took on a degree of clarity with the announcement on Sunday that ATV has received permission to broadcast in Guangdong province.

Approval from the State Administration for Radio, Film and Television comes just two months after former PLA officer Liu Chanle became ATV's controlling shareholder.

It also comes weeks after Li Ka-shing announced Tom.com's plans to buy a 32.75 per cent stake in the company from Lai Sun's Lim Por-yen.

With the abrupt withdrawal of the offer last night, all eyes are on the Guangdong deal - and the effect it may have had on ATV's valuation.

To put the deal in context, in June, Mr Liu bought a 46 per cent stake in ATV from chief executive Feng Xiaoping. This raised questions over editorial independence and the future direction of the company. Not only is Mr Liu a non-Hong Kong resident (although the broadcasting regulator waived the requirement), one of his first appointments was Chan Wing-kee as chief executive. Mr Chan is a member of the National People's Congress.

Mr Liu also has a 37.6 per cent shareholding in Phoenix TV, with a further 37.6 per cent held by media tycoon Rupert Murdoch via News Corp subsidiary Star TV.

In just weeks, the new ATV regime had achieved what Hong Kong broadcasters had coveted for years - legitimate landing rights in Guangdong.

ATV and fellow free-to-air broadcaster Television Broadcasts (TVB) had their programmes picked up by rogue cable operators in China's wealthiest region - yet other advertisements are inserted during the commercial breaks, denying them advertising revenue.

ATV yesterday estimated the hijacked advertising to be worth about 1.5 billion yuan (HK$1.4 billion) in a market that generates revenue of 3.5 billion yuan overall. ATV expects this to increase to 4.5 billion yuan this year.

HSBC analyst Anne Ling estimated that more than 60 per cent of viewership in the Pearl River Delta was for ATV and TVB.

Media research firm CSM further estimates - through data collected on viewership in Guangdong city with an audience of 3.8 million people - that this can be broken down to 64 per cent for TVB and 36 per cent for ATV.

ATV explained the sudden concession as lobbying of authorities simply paying off. Mr Chan cited a 'close co-operation with CCTV'. (In January, CCTV-4 and Phoenix TV developed a channel that targets Chinese viewers in North America. It was part of the deal struck with authorities in October to gain broadcasting rights in Guangdong.) AOL Time Warner and Star TV also have similar broadcasting rights.

In the ATV case, the timing of the landing rights is conspicuous - and canny, if media reports about a standoff between Mr Liu and Mr Li are to be believed.

There has been speculation that Tom.com's interest in ATV was a prelude to the former taking a stake in Phoenix, which boasts about 30 million viewers in China: Tom.com had sought to buy Star TV's stake and a small portion of Mr Liu's shares in Phoenix.

Rumours of a tug of war between Mr Liu and Mr Li soon followed.

Through Tom.com Mr Li would have become the second-largest shareholder in ATV had he taken Mr Lim's 32.75 per cent stake. At the time, the price tag - HK$290.37 million - put the broadcaster's value at HK$885 million.

Even in the worst case scenario however, the Guangdong landing rights are likely to have had a positive effect on the company's worth. Hong Kong shows little in the way of potential for the broadcaster. China landing rights do.

Consider the China market overall: 315 million television households with US$2.4 billion in net television advertising revenue. The Hong Kong market is a blip in comparison with its 1.9 million television households and US$430 million in net television advertising revenue, according to figures from Media Partners Asia.

ATV last year managed to turn a HK$46 million net profit, but historically has been in the red. There has been little to get excited about in the Hong Kong market. The company recorded a net loss of HK$147 million for 1999 and lost HK$82 million in 2000.

Ratings also continue to wane in Hong Kong.

Rival TVB likewise takes the majority of advertising - last year for example Jade took 67 per cent and Pearl 3 per cent while ATV Home had just 23 per cent. Its World channel gleaned just 1.3 per cent.

Domestic free-television licences for both expire on November 30 next year. While the Broadcasting Authority is poised to make recommendations on licences by November, both stations have submitted proposals to curb what they see as costly advertising standards.

These include stringent controls on products and services deemed acceptable and programme sponsorship. The broadcasters are not permitted to screen more than 10 minutes of adverts in any hour between 5pm and 11pm.

Yet Guangdong landing rights may not be a clear-cut panacea to salvage ATV from a sluggish SAR market.

'In terms of how much revenue it would stand to gain, that depends on the kind of revenue-sharing agreements that ATV cuts with various cable systems in Guangdong and how far it can increase its cable household distribution in the region,' Vivek Couto said, an analyst at Media Partners Asia.

This has been a grey area for broadcasters such as Phoenix, Star and AOL.

Although it may have lost up to US$50 million from signal piracy, 'I would suggest that it does not necessarily mean that it will gain US$50 million now just because of the deal . . . it depends on revenue-sharing', Mr Couto said.

This could equate to less than half that amount - ie, US$20 million. At the same time, TVB fares better in the ratings game and could be a stronger competitor if it also is granted landing rights.

According to Ms Ling, there are three kinds of deal that foreign stations have been negotiating with mainland cable stations: joint ventures, revenue-sharing and minutes-sharing. The latter was believed to be the deal struck by AOL. It would receive two minutes of advertising revenue out of 10 minutes advertising airtime per hour.

Yet the prospect of a much bigger market may have been enough to dissuade Mr Lim from selling his ATV stake, leaving Mr Liu for now in control of the show. Whether Tom.com has switched off for good is less clear.



Saga fit for prime-time