Phoenix Satellite Television has sealed a deal to sell content to China Mobile and expects overall advertising revenue to leap during the 2008 Beijing Olympics.
HONG KONG: Phoenix Satellite Television, a 24-hour news and entertainment broadcaster sometimes dubbed China's CNN, has sealed a long-term deal to sell content to China Mobile and expects overall advertising revenue to leap by a tenth during the 2008 Beijing Olympics.
Phoenix, 17.6 per cent-owned by Rupert Murdoch's News Corp, wants to move to the main board of Hong Kong's exchange to try and entice more investors' attention, a deal that Chairman Liu Changle said on Monday should entail a share sale.
Liu -- a well-connected former People's Liberation Army officer -- hopes the Summer Games will unlock a flood of commercials in 2007 and 2008 for a station often regarded as a snazzier alternative to staid state-run TV.
He also wants to sell content via new platforms such as mobile TV -- television delivered to cellphones -- which is where the world's top wireless firm comes in.
The deal with China Mobile -- a 19.9-per cent shareholder and parent of listed China Mobile-- could translate into HK$100 million (US$13 million) in annual profit.
That's roughly half of what the firm -- which see-saws between being in the black and the red in a highly volatile market -- now makes a year.
"China's media is getting more and more diverse and new media -- though a small part of the overall pie -- but it has massive potential," the tall, tanned executive, who will turn 56 this year, said in an interview in Hong Kong.
"It's not a lot of money in the greater scheme of things, but the China Mobile deal involves nearly no capital cost as well. It's a huge factor for our earnings growth."
Eleven-year-old Phoenix is now broadcast to Chinese-speaking audiences scattered across Asia, the United States -- via local services such as DirecTV -- and Europe.
But in its largest market, the fledgling broadcaster has to walk a fine line between Beijing's tight control over media and the need to ramp up ratings.
Phoenix has come under fire for watering down sensitive news, but it has also rapidly gained a reputation for taking more risks and being quicker on its feet than state-run peers, with plans to air the country's first gay chat show online and fast coverage of the Sept. 11 attacks.
Liu would not be drawn on that debate on Monday.
Shares in Hong Kong-based but mainland Chinese-focused Phoenix have gained a fifth in value since end-May, as investors bet on the emergence of the China Mobile deal.
Its Infonews channel -- which analysts call a perennial drag on the bottom line -- should make a profit for the first time in the third quarter, Liu said.
Profits from its China Mobile deal could be reflected in Phoenix's second-quarter earnings at the earliest. Its projected jump in advertising -- which along with licensing fees comprises 96 per cent of the firm's business -- would far outpace the anaemic 1-5 per cent growth of the past five quarters, Goldman Sachs estimates.
It posted a 3.9 per cent rise in ad and licensing sales in 2006 to just over HK$1 billion.
Finally, the firm will pursue and complete a years-long effort to try to get to the Hong Kong exchange's main board, a more difficult endeavour than envisioned because of a requirement to get its free-float to 25 per cent from 16 per cent now.
"We'll have to undertake an issue of new shares in the short term," Liu said. "But not to be on the main board deprives of a lot of investor eyeballs. That's bad for our stock's life and turnover."
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