HK CLP Telecom/Interactive JV -2: CLP To Have 75% Stake
Dow Jones Newswires
May 10, 2001
Dow Jones Newswires
HONG KONG -- Hong Kong's CLP Telecommunications Ltd. said Thursday it will establish an interactive television joint venture with Yes Television, which last year won a license to operate pay-TV in Hong Kong.
The venture marks the first time interactive television comes to the Hong Kong market.
CLP Telecom, which is the wholly owned telecom arm of CLP Holdings Ltd. (H.CLP), will hold a 75% stake of the venture, which will operate under the Oxygen brand name.
Yes TV will hold the other 25% and contribute its pay-TV license.
HONG KONG (Dow Jones)--Hong Kong's CLP Telecommunications Ltd. said Thursday it will establish an interactive television joint venture with Yes Television, which last year won a license to operate pay-TV in Hong Kong.
The venture marks the first time interactive television comes to the Hong Kong market.
CLP Telecom, which is the wholly owned telecom arm of CLP Holdings Ltd. (H.CLP), will hold a 75% stake of the venture, which will operate under the Oxygen brand name.
Yes TV will hold the other 25% and contribute its pay-TV license.
The transfer of the license to the newly formed entity must be approved by Hong Kong's Broadcast Authority because it was originally issued to Yes Television alone.
The two companies aren't initially injecting cash into the new venture, but their contribution of assets determined the 75-25 split, CLP TeleCom Managing Director Peter Heavyside, said. Each company will "fund its portion of cash calls as (the business) proceeds over the next couple of years," he said.
Yes Television has said it plans to spend about HK$200 million over the next three years on pay TV, Heavyside said, though the bill could increase as the new venture begins to offer other products besides pay TV.
The new entity will use CLP TeleCom's recently launched brand name Oxygen and will offer broadcast television, Video-On-Demand, broadband Internet access, e-mail, voice services and any other services that can be delivered using Internet Protocol technology, he said. This year the venture will offer 10 broadcast channels and up to 2,000 hours of Video-on-Demand. The company will buy content instead of producing it, which will keep costs down.
Yes TV has already reached an agreement with Pacific Century CyberWorks (PCW) for network access, Heavyside added.
The venture will launch pilot services to about 300 households by the end of the month, after which it expects a full commercial launch by the end of the third quarter or early in the fourth quarter, Heavyside said.
The companies are optimistic about Hong Kong's pay TV market despite concerns voiced among investment analysts and other operators that its prospects are limited due to its small size.
Hong Kong awarded five pay-TV licenses last July, though two winners, News Corp.'s (NWS) Star TV, and Hong Kong Network TV, later gave up their pay-TV licenses, citing concern about start-up costs and the size of the market.
Television Broadcasts Ltd.'s (H.TVB) Galaxy Satellite Broadcasting is still negotiating terms of its license and may eventually be forced to pull out.
Despite the fate of the other pay-TV licensees, Yes TV Chairman Thomas Kressner said, "Hong Kong is the most important market for us today."
Heavyside said within 10 years, the company projects 1.3 million households will subscribe to pay TV.
The new company expects to gain less than 5% market share in the first year but to grab 15%-20% market share by the fifth year, Heavyside said.
Oxygen's interactive TV service only needs to reach "well below 100,000 customers to make the business profitable," meaning 15-20% market share "yields a very profitable business," he said.
Heavyside said the company hasn't yet determined pricing for the interactive TV service but may charge between HK$118-HK$140 a month with additional charges for video-on-demand movies and broadband Internet access.
Separately, Heavyside said CLP TeleCom is "very interested in obtaining an FTNS (fixed-telecom network services) license." When CLP launched the Oxygen brand last month, the company said it plans to launch mobile services in partnership with one of Hong Kong's existing six mobile operators, but will buy the spectrum needed to provide the mobile phone service to its customers.
-By Kirsti Hastings; Dow Jones Newswires; (852) 2832 2337; kirsti.hastings@dowjones.com
-0- 10/05/01 10-38G
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