Network effect

Still influential but lossmaking

Changes in media ownership in Hong Kong often stir up controversy, and especially so when local broadcasters are linked to buyers from mainland China

This explains why a share buyback plan from Television Broadcast (TVB), the territory’s largest TV channel, lapsed this year.

The row started back in 2011, when a HK$8.6 billion ($1.2 billion) controlling stake in TVB passed to Young Lion, a consortium of Hong Kong financier Charles Chan, Cher Wang (chairwoman of Taiwanese smartphone maker HTC), and most controversially, China Media Capital (CMC), a Chinese state-backed investment firm.

The 26% stake was previously owned by the family of Sir Run Run Shaw, a media mogul who died in 2014 (see WiC222). Initially the deal met with little resistance, having appeared to balance the business interests of Hong Kong, Taiwan and mainland China. But relations between Young Lion’s partners began to sour last year when a plan was hatched to jack up the share price. This involved a HK$4 billion stock buyback – a move supported by TVB’s minority shareholders.

At this point, the full breakdown of Young Lion’s ownership structure was revealed. CMC held 79% of the firm but enjoyed only 32% of the voting rights, while Chan had 6% of Young Lion but carried 56% of the vote. In other words, CMC had invested the most for Shaw’s stake, but had little in the way of voting influence.

The dual-shareholding structure, Hong Kong newspapers suggested, was designed to minimise the influence of CMC, a conglomerate run by “China’s Murdoch” Li Ruigang (see WiC218). This was because of sensitivities surrounding the city’s commitments to freedom of speech, a key pillar of the post-1997 set-up. That said, CMC still got the lion’s share of TVB’s dividend payout.

However, the news of CMC’s larger-than-expected shareholding was worrisome to segments of Hong Kong’s more independently-minded population, where anti-mainland sentiment has become more common. Mounting pressure forced TVB to cancel the share buyback, which could have raised CMC’s effective stake further.

Another deal linking a TV broadcaster with a state-run firm from China is raising similar concerns. The companies in question are i-Cable, a struggling pay-television broadcaster, and the telecom giant China Mobile. i-Cable was set up by Wharf Holdings in 1993 to rival TVB but the property-to-ports conglomerate decided to cut its losses and sell its TV operation in 2016. China Mobile, one of the most cash-rich state firms, was tipped as a prospective buyer.

The problem is that Hong Kong’s ordinances stipulate that broadcasting licences are limited to companies of local domicile. With the government showing little sign of relaxing the rules, i-Cable was taken over instead by Forever Top, a consortium comprising several Hong Kong property firms. It has injected HK$700 million into i-Cable to keep it afloat but only a year after the initial takeover, it last month announced a preliminary deal to sell its TV content to China Mobile.

According to Apple Daily, the arrangement is effectively an indirect way for China Mobile to take control of an influential news provider. “The red giant corporation [China Mobile] doesn’t need to buy a stake directly in i-Cable to have its influence felt,” the anti-Beijing newspaper suggested.

China Mobile’s Hong Kong unit has already made its presence felt by streaming video content over its smartphone platforms, the Hong Kong Economic Journal says. And the fact that it has announced plans to livestream content from i-Cable, suggests that the latest deal is already done, alarming freedom of speech campaigners.

i-Cable’s shareholders are a happier lot, however. Buoyed by the fat contract from China Mobile, the company’s beleaguered shares jumped more than 70% in a single session last week…

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