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TVB Refocuses On China, Hong Kong

Hong Kong broadcaster TVB will devote more resources on tackling rising competition at home as well as growth opportunities in mainland China, after announcing a sale of its remaining 47% tranche in its Taiwanese pay-TV business.

The deal, priced at just over HK$1 billion (~US$133 million/NT$4.3 billion), follows TVB’s first move to reduce its holdings in Taiwan, after first selling 53% of its cable network to three Taiwanese investment groups, Lim Mao, De En and Lien, in the first half of last year.

Pending regulatory approval, the three shareholders will also acquire the remaining 47% stake, becoming outright owners of an operation that includes production facilities and three pay-TV channels: infotainment offering TVBS; TVBS News, a leader in the news segment; and TVBS Entertainment.

Both deals value the business at around 9-10x Ebitda.

Extra capital

While TVB retains real estate in Taiwan, including TVBS buildings, the move signals an effective exit from a saturated, slow-growth TV market, as challenges intensify elsewhere.

Additional capital, together with a greater focus, will help TVB defend its ~85% share of Hong Kong’s free-to-air TV market, which remains the main wellspring of its revenues.

Ailing free-to-air rival ATV, which has provided TVB with little serious competition in recent years, will be replaced in April by ViuTV, an ambitious new entrant backed by the city’s leading pay-TV and telecoms group PCCW.

Hong Kong’s terrestrial TV ad market, currently suffering from declining viewership and revenue, represented US$454 million in net ad spend last year, according to estimates from Media Partners Asia (MPA).

At the same time, both TVB and PCCW have been ramping up their OTT video services, investing in rights and technology in a market where affordable high-speed broadband is rapidly reshaping TV habits.

TVB is working on a new SVOD service to launch early this year, reportedly in March, following last October’s debut of a freemium service from PCCW, called Viu.

TVB is also eyeing greater momentum in mainland China, where its licensing and advertising business is run by TVBC, a JV with private equity firm China Media Capital (CMC), provincial conglomerate Shanghai Media Group and Gravity Corporation, an investment vehicle for CMC.

Regulatory changes and weaker demand have hampered TVB’s traditional China revenues from broadcast licensing, prompting a greater focus on original dramas and movies, as well as program deals with popular video sites.

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