Thu, Oct 19, 2006 - Page 11 News List

MBK Partners to buy into Taiwan cable TV provider

GOING FOR DIGITAL MBK partners will purchase a 60 percent stake in China Network Systems to try and cash in on the future market for digital content, analysts said

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MBK Partners Ltd, a private equity fund formed by former Carlyle Group executives, will buy 60 percent of China Network Systems Co (中嘉網路), Taiwan's second-largest cable television provider, for NT$30.9 billion (US$932 million).

"The deal was signed yesterday," Gary Tsai (蔡俊榮), vice president of Taipei-based China Network Systems, said in a telephone interview yesterday.

He declined to give further details.

China Network is owned by News Corp's Star Group, which holds a 20 percent stake, and Taiwan's Koo family, which holds 80 percent.

MBK's purchase comes amid speculation the government will allow the nation's four major cable TV networks to boost revenue by delivering extra services such as digital television and high-speed Internet. Currently, 6.5 percent of cable subscribers have digital television, compared with more than 90 percent in Hong Kong.

"It may work for MBK if CNS, under its control, can deliver a well-executed broadband strategy and it can capitalize on the `promise' of new regulatory environment to deliver digital pay-TV growth," said Vivek Couto, executive director of Media Partners Asia Ltd in Hong Kong.

Nelson Chang (張安平), president of China Network and vice chairman of Koo-controlled Taiwan Cement Corp (台泥), a minority shareholder of China Network, was unavailable for comment.

The deal and purchase price were reported by the Chinese-language Economic Daily News earlier yesterday.

Taiwan had the second-highest cable and satellite television penetration rate in Asia with 88 percent at the end of last year, behind South Korea with 92 percent, yet average revenue per user was the ninth highest, at US$17.07, according to figures compiled by Media Partners.

Relaxation of rules by the National Communications Commission will allow cable television providers to set their own prices and roll out cable Internet services which could boost profitability.

Taiwanese operators could achieve operating margins as high as 60 percent for their cable Internet businesses, based on similar margins elsewhere in the region, according to Couto.

China Network's average revenue per user was NT$578 last year, less than that of Taiwan Broadband Communications (台灣寬頻) and Eastern Multimedia Co (東森多媒體). China Network had 1.01 million customers at the end of June, behind Eastern Multimedia with 1.08 million and ahead of Taiwan Broadband, which had 658,000.

Meanwhile, Macquarie Bank Ltd, Australia's largest securities firm, said yesterday it sold 20 percent of Taiwan Broadband.

The Sydney-based bank declined to name the buyer of half its 40 percent stake or give the price paid.

The Macquarie Media Group, managed by Macquarie Bank, agreed to buy Taiwan Broadband from US buyout firm Carlyle Group in December for A$1.19 billion (US$898 million), in a deal that gave it 12 percent of Asia's third-largest cable TV market. Macquarie Media bought 60 percent and Macquarie Bank 40 percent.

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