TVB to sell Galaxy stake to a US firm for $542m

After a long wait, Television Broadcasts (TVB) yesterday announced it had finally found a buyer for its Galaxy Satellite stake, clearing the way for the launch of a pay-television service to rival dominant player i-Cable.

Analysts applauded the deal with Washington-based satellite services provider Intelsat. However, they warned the venture faced stiff operating costs for at least three years, during which they expected it to remain unprofitable. Analysts were also concerned the buyer lacked TV experience.

TVB said it was selling a 51 per cent stake in Galaxy for a HK$542 million consideration. Intelsat will become the majority owner and will pay HK$413.3 million in cash over three years - HK$173.9 million, HK$158.3 million and HK$81.1 million - and will provide transponder capacity worth HK$128.7 million.

'It is not cheap at all. Especially as it will be loss-making for three years at least,' Kim Eng Securities analyst Jimmy Lam said.

TVB, which will hold a 49 per cent stake, is to contribute HK$196.6 million in cash to the venture - HK$138.1 million, HK$45.2 million and HK$13.3 - over three years. It will also provide programming services valued at HK$324.15 million.

The transaction values Galaxy at HK$1.06 billion, in line with analysts' estimates.

'It is questionable whether they [the partners] might have to contribute more cash in the future,' said Kristian Jhamb at JP Morgan. 'The HK$600 million total cash doesn't seem to be enough. It barely covers the total capital expenditure required.'