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China Mobile Acquires Stake From News Corporation
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By DAVID BARBOZA
Published: June 8, 2006
SHANGHAI, June 8 — China Mobile said today that it had acquired a 19.9 percent stake in Hong Kong's Phoenix Satellite Television from the News Corporation.

The deal, worth an estimated $180 million, gives one of China's largest telecommunications companies a sizable stake in the country's largest foreign owned television broadcaster.

But the agreement also signals a divestment of sorts for Rupert Murdoch's News Corp., which had been aggressively seeking to expand its television offerings in China tightly controlled media market.

Before the deal, the Star Group in Hong Kong, a News Corp subsidiary, held a 38 percent stake of Phoenix Satellite Television and, along with the company's founder, was the largest single shareholder in the Chinese-language television network. After the deal, News Corp's Star Group will retain 17.6 percent of the company.

In a press release, the Star Group did not disclose why it chose to reduce its holdings in the Hong Kong company.

Phoenix Satellite Television, however, has become a force within China because it reaches over 140 million viewers here and it has its own news broadcasts, a privilege no other foreign owned company has in China.

Foreign media companies like News Corp, Time Warner and Viacom, have only limited access to China's huge television market, mostly reaching upscale hotels, luxury apartments and parts of southern Guangdong province, near Hong Kong. All three media giants are eager to expand their presence in China.

But when television programming restrictions tightened last year, there were soon published reports that Rupert Murdoch's News Corp was seeking to divest all of its holdings in Phoenix Satellite Television.

News Corp officials denied the rumors earlier this year, saying there was no plan to "exit" the Phoenix venture.

But late today, in a joint press release, the Star Group said it had sold more than half its stake to China Mobile, one of the world's largest cellular phone serivce providers.

Officials at China Mobile, which is based in Beijing but has a Hong Kong listed company, said the deal would allow them to form a strategic alliance to jointly develop, market and distribute new media content onto mobile phones with the new high-speed 3G technology now being developed in China.

Ahead of the announcement today, shares of Phoenix Satellite Television, which had soared on rumors of a deal, were suspended from trading in Hong Kong.

Hong Kong's business newspaper, The Standard, was the first to report the pending deal this morning.

But the agreement was not formally announced until after 5 p.m. Thursday, when China Mobile, Phoenix and the Star Group issued a joint press release.

The companies did not disclose the value of the deal but based on market prices a 19.9 percent stake is believed to be worth about $180 million.

News Corp's Star Group did not indicate why it chose to sell most of its shares in Phoenix Satellite, which also broadcasts Chinese language programs in North America, Europe and other parts of Asia.

The venture had been an important one for News Corp.

The company gained an early foothold in China in 1996 through its investment in Phoenix Satellite Television, a Hong Kong-based company that won approval to broadcast into mainland China.

The company was founded by Liu Changle, a former People's Liberation Army soldier from mainland China with close ties to regulators.

With today's deal, Mr. Liu, the chairman of Phoenix Satellite Television, becomes the largest shareholder, with a 38 percent share of the company. China Mobile becomes the company's second largest shareholder.