China to Set Up National Cable TV, Integrate Regional Networks

  • New company to buy regional operators, seek IPO in three years
  • Move is a step toward eventual media-telecom convergence

China will integrate the nation’s regional cable TV systems into a national network, a step toward combining television and telecommunications infrastructures.

The integration will initially be helmed by China Broadcasting Network Co., founded in 2014 with the goal of uniting the nation’s fragmented cable TV system, according to a guideline jointly issued on Friday by the Publicity Department of the Communist Party of China Central Committee, Ministry of Finance and the State Administration of Press, Publication, Radio, Film and Television.

China Broadcasting will purchase stakes in closely held regional and provincial networks, then make the companies shareholders of a nationwide cable TV company as the first step. In the second phase, the new national cable operator will seek a public listing and consolidate the listed regional TV networks. Both steps are to be completed by 2020 under the plan.

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"This is a very pragmatic step,” said Steven Liu, an analyst at China Securities International. “Before a telecom-media convergence can happen in China, the cable operators will have to sort themselves out first, sorting out the regionalism and balancing the interests between central and provincial networks." 

China’s nine listed regional cable operators had a combined market cap of 219 billion yuan ($32 billion) as of Friday, according to data compiled by Bloomberg. There are two dozen others that are closely held.

China Broadcasting earlier this year was awarded licenses for fixed broadband and 700 megahertz wireless capacity, considered a valuable frequency that can be redeployed for wireless use more cheaply than the spectrum that China’s three telecom giants have been awarded.

The license drew concerns that the nation’s telecom operators, whose core listed units are China Mobile Ltd., China Unicom Hong Kong Ltd., and China Telecom Corp Ltd., will face competition from China Broadcasting. Friday’s guidance to reorganize cable resources means the three wireless carriers will have some breathing time instead of worrying about imminent competition, said Liu.

"In the long-run, cable and telecom operators would open access to each other and compete freely," he said.

— With assistance by Jeanne Yang

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