Mc Caw, Malone, Murdoch Chandra?

With the deal for ICO, an Indian media mogul may go global

Subhash Chandra was fretting. It was Nov. 30, his 49th birthday. But India's usually unflappable media baron wasn't enjoying the gaily wrapped bouquet of orchids on his desk. He wanted another gift instead: ownership of ICO Global Communications Ltd., the British satellite telecom company that was in bankruptcy. A bidding war with American telecom tycoon Craig O. McCaw kept ICO out of his grasp. "My vision is an impossible, difficult vision," he said despondently.

Impossibility doesn't sit well with the driven, deal-making Chandra. Just two days later, he was in the Presidential Suite of New York's Four Seasons Hotel striking a deal with McCaw on an ICO takeover. And the next day, ICO announced McCaw and Chandra would get 74% of the company in return for a $500 million capital injection. Chandra gets about a third of that stake.

For Chandra, the deal is a major step forward in his drive to become a global media magnate. After starting with just one channel seven years ago, Chandra now runs India's largest cable-TV company, Zee Telefilms, from a run-down office in the heart of Bombay. Zee continues to gobble up ad revenues from India's sluggish, state-owned television monopoly, Doordarshan, and has outperformed private cable channels owned by Sony Corp. and Rupert Murdoch's News Corp. It also beams programs via satellite to ethnic Indians abroad.

The ICO stake will give Chandra a global profile. A rival to Motorola's troubled Iridium consortium, ICO expects by 2001 to have a network of 10 so-called "middle earth" satellites orbiting 6,000 miles up, beaming voice and data signals around the world to customers using special handsets costing $1,000 each. The scheme meshes well with Agrani, a Chandra-owned company that plans to launch a $750 million satellite telecom service for India in two years. With ICO, he can extend his reach overseas. Analysts say he is preparing to list his companies in the U.S.

Not all Chandra-watchers are optimistic. "For him to go into the global satellite business right now is scary for investors," says Samir Arora, Singapore-based head of Asian emerging-markets investments for Alliance Capital Management: He has 6% of his funds in Zee. "We prefer he consolidate his media businesses and not be distracted." Punit Goenka, Chandra's 25-year-old son and a manager of the satellite projects, laughs off the fears. He claims most of the money going to ICO will be Chandra's personal savings, not investors' funds. He also insists that Chandra and McCaw "will work shoulder to shoulder" in India. "They're both barons, both self-made men," Goenka says.

Chandra, whose 70% stake in Zee is valued at $4 billion, dropped out of college at 18 to join the family's modest grain-trading business. He then built, from scratch, the world's second-largest laminated tube business, Essel Packaging, with such clients as Unilever and Colgate-Palmolive. He plowed the profits into Bombay real estate and India's first amusement park.

But the park proved less popular than expected. Then "someone suggested satellite television," recalls Chandra. To skirt the Indian government's ban on satellite uplinks from India, his Zee connected through Hong Kong-based Asia Satellite Telecommunications Holdings Ltd. Enterprising local operators downloaded his signals and ran gray-market cable services, quickly giving Chandra an audience for his programming of slapstick and low-budget Hindi soap operas. Zee's revenues, currently at $100 million, have been rising about 30% annually. Chandra's aim is to hook all of Zee's 100 million cable-TV viewers to the Internet.

The hunt for ICO began after Chandra solved another headache--Rupert Murdoch. The Australian tycoon had acquired a 50% stake in Zee through his purchase of Asiasat from Hong Kong's Richard Li. But the relationship soured, and Chandra used his political leverage to thwart Murdoch's ambitions in India. In October, Murdoch sold his stake to Chandra for $300 million in cash and stock. This Indian executive has a long way to go before becoming a global player. But he has the moxie to make a serious bid.

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