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AOL TW sells stake in key Chinese net

Alliance to give subsid help with CETV's growth

HONG KONG — AOL Time Warner has sold a controlling stake in youth-oriented Chinese Entertainment Television, its key into the much-coveted China market, to tycoon Li Ka-shing’s Hong Kong-listed media company Tom.com.

The strategic alliance, announced Wednesday, will give AOL Time Warner subsid Turner Broadcasting System Asia Pacific the local connections it needs to help propel CETV’s growth. “It’s like a guy waiting around until his 40s to get married,” said Steve Marcopoto, president and managing director of TBSAP. “We waited a long time to find the right partner.”

Tom.com, which is involved in outdoor advertising and publishing, will acquire 64.1% equity interest in CETV. TBSAP holds 36.9%.

Currently, TBSAP holds 80%, Lark Holdings 16% and CETV founder Robert Chua has 4%. Deal gives TBSAP the option to purchase back part or all of Tom.com’s shareholding. Tom.com will issue 21 million new shares, at 2.353 Hong Kong dollars each (30¢), to finance the acquisition.

CETV, a 24-hour Mandarin-language channel, reaches 2.2 million households in southern China. It was the first foreign web to be granted cable television landing rights in China in 2001, and under TBSAP, it showed a global mix of Asian dramas, variety gameshows, entertainment news and international movies.

In April, it was granted a license to expand across the country in authorized locations like hotels. Despite clearing these hurdles, CETV generated revenue of only $450,000 in 2002 and reported a loss of $17 million.

Channel to rebow next year

Deal will be completed by September, when Tom will take over the management rights of CETV; a channel relaunch is expected in the first quarter of next year. Tom will also assume funding obligations for CETV up to a total of $30 million over 30 months.

TBSAP’s role is reduced to managing CETV’s programming standards and maintaining reciprocal cable carriage arrangements with CCTV-9. The two companies will work together to expand cable carriage of CETV in China and develop program opportunities within AOL Time Warner.

Though it has no television experience, Tom has a strong ad network in China, which should help increase CETV’s revenues, and which Marcopoto admits TBSAP lacked. “We are a global advertising network, selling Singapore Airlines and Rolex,” he said. “But it’s a different ad picture in China. There are dozens of emerging advertising companies, and we need a strong ad team to sell to them. That’s what our strategic partner is.”

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