HONG KONG--Cable & Wireless HKT (CWHKT) and Star TV have combined their pay TV plans with CWHKT's Internet operations into a new company that they intend to take public.
The service will integrate both pay TV and Internet access, and be delivered to homes by a combination of satellite and CWHKT's broadband network.
The service will use Star TV's Digital TV platform to offer 50 television channels. There will also be video-on-demand, broadband and conventional Internet access as well as new services such as online shopping.
Allen Ma, chief executive of CWHKT's Interactive Multimedia Services (IMS) subsidiary said: "With the combined power of the two companies, we are very confident we can create a new market leader in home entertainment."
Herbert Fung, an analyst with Credit Suisse First Boston, said the venture was a win-win proposal. Combining CWHKT's DSL (Digital Subscriber Line) based network with Star TV's satellite experience will give them coverage in both urban and less populated areas, he said.
At the same time, CWHKT's strength in Hong Kong would combine well with Star TV's regional presence.
Fung also praised the combining of a content company in Star TV with CWHKT's experience in delivery.
The service is expected to be introduced next year, in Hong Kong initially, although the two partners plan to expand it to the rest of Asia, with a focus on Chinese communities.
The company will initially be 60 percent owned by CWHKT and 40 percent by Star TV. However, Linus Cheung, chief executive of CWHKT said: "We plan to seek a public listing of a portion of the equity of the venture as soon as possible."
He added that they would go for a dual listing on both Nasdaq and in Hong Kong.
Previously, CWHKT had been rumoured to be seeking a listing for IMS. However, Fung noted listing the new company would be more successful as the new entity will be a service provider only. CWHKT would not need to inject its network backbone into the venture, which they would have done with an IMS listing.
In the event of a listing for the new company, CWHKT will be issued with US$300 million in redeemable cumulative preference shares, as well as warrants to increase their shareholding to 70 percent in the future.
Earlier this year, the two companies had announced separate plans to apply for pay TV licenses. According to Gareth Chang, chairman and chief executive of Star TV, the two companies were already in discussions at the time they made their applications, but had not yet decided to proceed.
Bruce Churchill, Star TV's deputy chief executive and chief operating officer said they would both proceed with their applications, and work with the government to amend the licenses if necessary.
Making a brief appearance at the announcement, Rupert Murdoch, chairman and chief executive of Star TV's parent company News Corp. said the venture marked the first time they had seen the convergence of the Internet and television.
He said: "We see it as a good beginning and a very important move for our company."
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