NEW YORK, SEPT 25: News Corp is better positioned to operate in India now that it has swapped its Indian joint venture interests for cash and a 7.5 per cent stake in its existing partner, Zee Telefilms Ltd, analysts said.Star TV, a unit of Rupert Murdoch's News Corp Ltd, and Zee Telefilms, a leading player in the huge Indian media market, each owned half of the venture. The move will eliminate obstacles Murdoch has had operating as a non-Indian player and instead give him an insider's ticket to "Bollywood," India's Hollywood."Murdoch reduces his participation, but it is participation in an asset that has greater potential. It is smart and it pays," Richard Read, senior analyst at Credit Lyonnais Securities in New York, said.The joint ventures involved in the deal include Zee TV, Zee News, Zee Cinema and Siticable. The total value of the deal is about $300 million - half in cash, half in Zee Telefilms stock. "India is proving to be a difficult market for non-Indian entities to launch televisionnetworks. A combination of some dramatic regulatory shifts and enormous levels of piracy, with cable television wires strung through trees, has made it very difficult to establish a strong presence," Chris Dixon, PaineWebber media analyst, said.The deal leverages Star TV's experience in India and at the same time aligns it with one of the primary producers and suppliers of products in "Bollywood," one of the most prolific movie industries in the world, said Dixon.Star TV, Asia's leading satellite TV broadcaster, was established in 1991 and became a wholly-owned subsidiary of News Corp in 1995. Its channels provide both subscription and free programming to over 300 million people in 53 countries in Asia, India and the Middle East.The deal also makes financial sense, analysts said. "It's a good number for News Corp.," said Dixon about the purchase price. Media industry sources who spoke to Reuters earlier Friday in Asia were meanwhile mixed in their impressions of the deal.While some analysts saidZee made a good deal by having to pay Murdoch what they considered a relatively small sum, others said Zee may have overpaid based on concerns that among media holdings, broadcasting is a relatively risky investment. "The valuations appear to be a little stretched," said Devina Mehra, director research at First Global Finance.Mehra also voiced concern over uncertainties surrounding a recent move by Zee's top executive, Subhash Chandra, to fold his own private media holdings into the public company he heads. Until the financial effects of Chandra's move are clear, the financial condition of Zee will also be hard to evaluate.Mehra also said some investors may not like that Rupert Murdoch, with the Zee deal, appears to be partially leaving the spotlight. "Investors have always viewed Murdoch as the positive factor in the company and with his moving out they may react negatively to the news," Mehra said.For its part, Star TV also said the deal made sense financially. The deal is subject to the approvalof Zee Telefilms shareholders and regulatory authorities, including the Reserve Bank of India. As part of the transaction, Star TV and the Zee Group also said that all outstanding legal matters between the parties would be settled.
