Want to see a billionaire turn into a millionaire? It’s easy — just get the tycoon to venture into the airlines or media business!
Well, the old joke comes to mind when we hear the travails of Wharf Holdings’ bosses as they struggle to avoid more losses from their media unit, i-Cable Communications.
Failing to find a buyer for the bleeding media arm, conglomerate Wharf, controlled by the family of the late tycoon Yue-kong Pao, is mulling various options for i-Cable, leaving the unit’s future up in the air.
i-Cable fans and minority shareholders received a shock last Thursday as they got news that Wharf has decided against further financial support for TV business after May.
Without a buyer and a lifeline from the parent, there are fears that i-Cable will be forced to suspend or even shut down its operations in the coming months.
i-Cable said in a regulatory filing that Wharf won’t provide fresh funds to media business once the existing commitments expire.
The pay-TV operator will now hire a consultant for advice on alternative sources of funding or business restructuring as it seeks to find ways to stay afloat.
With the company’s survival in doubt, employees as well as shareholders are a worried lot.
Meanwhile, some stakeholders are questioning as to why the controlling YK Pao family and their associates, who made HK$13.8 billion last year from the group’s various businesses, have chosen to give up on a TV channel that is known for its impartial news reporting.
Given the huge wealth of four families whose scions had married Sir YK Pao’s daughters, they can easily afford to take i-Cable’s losses in stride and keep subsidizing the pay-TV business, critics say.
The feelings are understandable as i-Cable’s annual loss last year stood at around HK$313 million, a not-too-big amount compared to Wharf Group’s total profit of more HK$21 billion.
Well, it’s true that the parent could have held on for some more time, though we must acknowledge the fact that i-Cable does seem like a hopeless case after it posted losses for nine straight years.
Wharf, it can be argued, can easily use income from one of its several major property developments to keep the 2,200-staff TV channel going.
So, why has it decided to play tough over the 24-year media business?
From an outside perspective, we can’t help but speculate that a key reason behind Wharf’s rigid stance is its desire to have fresh negotiations with authorities over terms of the TV business.
Wharf secured a 12-year free-TV broadcasting license last December after committing HK$3.45 billion in total capital outlay.
The group said it will pour HK$1.18 billion into the free-TV unit, Fantastic Television, in the first six years.
But now, as i-Cable has posted another hefty annual loss and as it continues to struggle to find the right business model, Wharf bosses may be taking the view that it may be better for i-Cable to switch from the pay-TV business and focus its efforts on upcoming free-to-air operations.
The free-TV business will require less capital commitment and it can use pretty much the same existing staff.
Having won public support for its news coverage, especially for its impartial stance on China-related stories, Wharf wants to persuade the government to relax the capital commitment requirements.
If authorities don’t relax the investment stipulations, there is a danger that the entire business could shut down — this is the message that Wharf is sending to regulatory authorities.
As a matter of fact, it is the huge capital commitment requirement that has led to i-Cable failing to lure potential investors.
Wharf did not want to undersell the business, so it called off all deals. At the same time, it also declared that it will not increase its i-Cable shareholding.
All this has left the media arm on extremely shaky ground.
The next six weeks will be crucial for the company, and the whole issue will also be one of the early challenges that Hong Kong’s incoming chief executive will face.
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