SEPT 18, 2004
Media rivals strike deal to curb losses
After four years of media liberalisation, SPH and MediaCorp come together to stem bleeding in TV, free newspaper ops
By Chua Mui Hoong
AFTER four years of bruising competition, media rivals Singapore Press Holdings (SPH) and MediaCorp have worked out a deal to stem the bleeding from their loss-making operations.
They have agreed to merge their mass market television operations and free newspaper businesses.
Print giant SPH, which publishes 14 paid newspapers in all four official languages including its flagship The Straits Times, will give up TV channels U and i, and stop publishing the free tabloid, Streats.
But it will continue to have a presence in both television and free newspapers.
SPH MediaWorks, which operates the Chinese-language Channel U and English-language Channel i, will be merged with MediaCorp TV's Channels 5, 8 and TVMobile in a new company, MediaCorp TV Holdings.
For $10 million, SPH will get a 20-per-cent stake in the new company, while MediaCorp keeps the rest.
The company will run Channels 5, 8 and TVMobile, Channel U and MediaCorp studios which produce most of the station's local programming. The commercial viability of Channel i will be reviewed.
In the free newspapers scene, SPH's Streats will be merged with its rival, Today, which is published by MediaCorp Press.
The Streats name will be retained in the Today masthead, as SPH will take a 40-per-cent stake in MediaCorp Press, for $19.16 million. The rest of the company will be owned by MediaCorp.
Media regulatory authorities have given in-principle approval to the deal, which is expected to take effect by the end of this year.
Lay-offs are expected, but the details have not been worked out yet.
A manpower committee chaired by MediaCorp independent board director Soo Kok Leng and comprising senior human resource executives from both sides, will undertake a 'staff rationalisation exercise'.
SPH has over 400 staff in the affected units, and MediaCorp, over 700.
Until all the legal work is completed, both sides will continue with their current operations.
The deal took three months of intense negotiations, with company executives and lawyers working round the clock on Thursday night. They agreed on terms at 6.45am yesterday, and signed the documents at 12.45pm, said SPH chief executive officer Alan Chan.
In statements and at a 30-minute joint press conference at the Shangri-La hotel, it was plain that both companies had lost money and were continuing to do so, and both saw the merger as a win-win deal 'to stem losses and enhance shareholder value'.
The market agreed. SPH's share price rose 36 cents to end the day at $4.78 - the highest since April 2002 - despite trading being suspended from 11am until 3.15pm at the company's request.
The deal puts a stop to competition which Mr Chan called 'irrational', and MediaCorp Group CEO Ernest Wong described as 'value-destroying'.
The battle began in 2000, when print monopoly SPH was given a TV licence, and broadcast monopoly MediaCorp was granted a newspaper publishing licence, in a quid pro quo arrangement sanctioned by the government to inject competition into the sector.
The bleeding began right away.
SPH's TV arm has lost over $40 million a year since then, while its freesheet Streats chalked up over $5 million in losses each year.
With severe discounting in advertising rates, MediaCorp TV also chalked up losses: $10 million this year, and $20 million last year. Its freesheet, Today, lost $9.6 million in the 2004 financial year.
Last November, Minister Mentor Lee Kuan Yew and Minister for Information, Communications and the Arts Lee Boon Yang both expressed scepticism about the viability of two TV companies in a small market like Singapore.
Yesterday, both CEOs confirmed that discussions which had been held off and on for close to three years intensified recently when it became clear there would be a willing buyer and willing seller.
The advantage of the mergers for SPH is that they 'immediately stem the losses of our TV business', Mr Chan said.
He said: 'SPH believes that the merger will bring rationality back into the TV and free newspaper markets, and should ultimately lead both businesses to flourish.'
Mr Wong said he had always maintained that Singapore was too small for two TV players, but said that even after the merger, viewers would have plenty of choice with more than 50 cable TV channels available here.
In the print market, he believed there was room for two mainstream morning papers.
Unaffected by the changes are MediaCorp's other TV channels such as Channel News Asia, Suria, Central, or its movie production and magazines operations.
Despite the CEOs' upbeat assessment and the market response, anxiety was stamped all over the faces of SPH and MediaCorp staff yesterday, as company executives met employees in closed-door meetings.
Staff were most concerned about job losses, and changes in employment conditions. MediaWorks artistes, for example, were worried that they might be penalised for crossing over to SPH.
Asked if Singapore investment company Temasek Holdings, which owns 100 per cent of MediaCorp, had been a player in the negotiations, Mr Wong said the talks were strictly between SPH and MediaCorp as a 'commercial entity'.
But he added: 'Of course they are 100-per-cent shareholders of us and we have to respect some of the things that 100-per-cent shareholders can do.'
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Copyright @ 2004 Singapore Press Holdings. All rights reserved.
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