Star TV, CyberWorks Spar in India

An announcement that Star TV has bought a stake in a big cable network in India could heat up a rivalry there with Richard Li's Pacific Century CyberWorks Ltd. Both companies want to target the lucrative Indian market with interactive entertainment services. But Star TV - a company that Li actually started, and then sold to Rupert Murdoch - seems to have beaten CyberWorks at jumping on some of the pipes that will deliver these goods.

Star TV, wholly owned by News Corp. of Australia, said late Thursday that it bought a 26 percent stake in Hathway Cable and Datacom Private. Hathway owns India's second-largest cable network, which reaches about 2.5 million homes. Star also said that it would work with Hathway to launch a fully integrated interactive television and broadband Internet business in the first half of 2001. According to a report by Dresdner Kleinwort Benson in Hong Kong, Hathway is one of three major cable operators in India that together account for 35 percent to 40 percent of the market, with the rest split among a very fragmented set of smaller players.

"Hathway is one player in the cable industry in India. It doesn't mean that there aren't other opportunities, but it is very clear from this announcement that CyberWorks is not the only one who has the idea of delivering convergence through a cable network," said Sanjeet Devgan, an analyst at Prudential Bache in Hong Kong. "The bears would say that there is a brewing potential for competition. CyberWorks has said that their major markets are India and China, but they have not made much headway into India."

CyberWorks' foray into India so far includes a 49 percent stake in Data Access, a Delhi-based Internet service provider; a 5 percent stake in India's largest portal, Rediff.com; and media rights related to international cricket matches played in India through 2004. CyberWorks has said that its "Network of the World" entertainment service, currently produced in English out of studios in suburban London, will also be produced in local Asian languages including Hindi for the Indian market.

"The Indian market has always had a lot of potential. It's a big space and there are a lot of partners," said Joan Wagner, head of international corporate communications at CyberWorks.

Star executives trumpeted the deal in a statement, but were unavailable for comment specifically on competition with CyberWorks. "In a market such as India, with constraints in telecommunications infrastructure, access definitely commands a premium," said Peter Mukerjea, who runs Star's operations there. "Our alliance with Hathway will provide Star with an important interactive television platform for distributing our multi-service offerings in India."

In 1993, Richard Li sold Star TV, a Pan-Asian satellite network that he founded, to Rupert Murdoch for US$950 million. The price was considered high at the time, and the sale gave Li a bundle of cash to get CyberWorks going. James Murdoch, Rupert's son, now oversees Star TV, which reaches over 300 million viewers across 53 countries and is a strong player in the Indian cable-TV market. In March, Li prevailed when News Corp. backed Singapore's government-owned telephone company and lost a bid against CyberWorks for the takeover of Hong Kong's dominant telephone company..

Meanwhile, CyberWorks' shares have been sliding all week, mostly on concern that the U.K.'s Cable and Wireless will dispose of the 4.9 percent it received in shares when it sold its Cable & Wireless HKT business to CyberWorks. Since the beginning of September, CyberWorks' shares have fallen by almost 20 percent. The news that major deals had fallen apart - including one with Internet giant CMGI to build an international venture fund, and one with a Taiwanese company to produce and distribute Chinese content - also contributed to the selling.

CyberWorks' shares ended Thursday trading in Hong Kong at $1.47, hitting its lowest level since last December.

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