Can Wharf Tv Get Out Of Dry Dock?

Judging from its suburban Hong Kong headquarters, Wharf Cable TV certainly looks like an emerging new power in Asian TV programming. On a single floor, there is the hip studio of Wharf Cable's own music channel, the comfortable living room set of its Women's Channel, and stuffed toys and other props for its Children's Channel. Downstairs are newsrooms for Wharf's two news channels.

The only problem: Few Hong Kong viewers seem impressed with the 10,000 hours of original programming Wharf is churning out each year. The two-year-old network is still 40% short of the 250,000 subscribers it had projected by yearend 1994. That's not a good sign, considering Wharf Cable's mission of challenging local Cantonese-language powerhouse Television Broadcasts Ltd. as king of Hong Kong home entertainment. "They just don't have the quality of programming to get subscribers," says Charles Whitworth, analyst at James Capel Asia Ltd.

The sluggish start in cable is just part of what is worrying investors in Wharf Holdings Ltd. who are now questioning the strategy of Peter Kwong Ching Woo, 45, the flamboyant chairman of parent company Wheelock & Co. In the late 1980s, Woo set out to diversify the Hong Kong property and container-port empire built by late tycoon Y.K. Pao. Wharf will plow $1.5 billion into Hong Kong's first cable network and telecom services. In China, it has already spent some $130 million on ambitious property and infrastructure projects in five Chinese cities.

But many of Wharf's China ventures are bogging down in squabbling with Beijing bureaucrats. And the financial community is losing patience with the foray into the Information Age. "People are skeptical," says Sylvia Wong, an analyst at Morgan Grenfell Asia. "Wharf has no prior experience in the cable or telecom business." She predicts that Wharf will earn $400 million on revenue of $1 billion this year. But that is flat compared with 1994, when profits rose by 7%, and mostly from property. In early August, Standard & Poor's Corp., citing risks in cable and telecom, changed its long-term financial outlook for Wharf from "stable" to "negative."

The biggest concern is over cable TV. Already, Wharf has spent some $450 million in the effort. Its difficulty enlisting subscribers is especially worrisome because regulators prohibit Wharf from selling advertising. Its approach to programming seems to be one reason. Few major international channels are offered on its 20 channels. Partly, that's due to Wharf's efforts to push its own programming--both to save money and to establish its own brand name.

But the attitude is changing. Wharf recently signed up Home Box Office and CNBC, plus several hours a week from the Playboy Channel. Soon, the Discovery Channel hopes to strike a deal. Wharf is putting more focus on sports, news, and movies from big-name channels and less on its own shows. Says a regional manager of another American cable network: "They realize now that association with other brands is the best way to build a network."

LOOMING DOGFIGHT. Still, Wharf contends that much of the criticism over low viewership is unfair. For one, Wharf launched its service largely in housing estates for the poor. It did so to convince wary government regulators that it would not be serving only affluent neighborhoods. The company insists that it's too early to fret about subscriptions. "Wharf is a long-term player," says spokesman Nick Thompson.

But Wharf's exclusive cable franchise expires on July 1, 1996. Authorities may then license such rivals as Hong Kong Telecom Ltd., now testing a video-on-demand service, and Rupert Murdoch's Star TV satellite network. Wharf already faces a dogfight in telecom. Its T&T unit in July became one of three new providers of local and long-distance phone service after Hong Kong Telecom's monopoly ended.

With its property holdings still churning out lots of cash, Wharf certainly has the resources to chase new telecom and media opportunities. But it has precious little time to establish itself as market leader before the competition heats up further.

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