Here are the Mergers, Where are the Acquisitions?

BEIJING --- The largest of the current mergers of Chinese state radio and TV assets is scheduled to be completed in July as China Central TV (CCTV), China National Radio (CNR) and China Radio International (CRI) are re-launched as China's "flagship group of national TV and radio stations".

According to the official China Daily, broadcasting authorities confirmed on April 25 that a special team is stepping up preparation work for the merger, one of the major stages in the government's widely ridiculed media reform program designed to help China face up to foreign competition after entry into WTO.

CCTV's news comes as Beijing TV and Beijing Cable TV emerge as the new Beijing TV to join Beijing Radio as part of the Beijing Radio & TV Group headed by a short term interim President. As for the several companies controlled by these units, they are being transferred to the Ge Hua Group, the vehicle Beijing hopes to list on the Shanghai bourse once it has legally acquired the choicest assets.

Quoting unnamed SARFT sources from an article in the Guangzhou Daily, the China Daily said that along with two recently formed local TV and radio groups in Hunan and Shanghai (see related articles), the new CCTV led group will join in the effort to compete with multinational media giants following WTO entry.

The first group approved by SARFT was Hunan Radio, Film and TV Media Group formed on December 27 last year (see CMM passim). It owns seven local TV channels, four radio stations, a newspaper, a website, film studios and other businesses, worth a total of RMB3 billion (US$360 million). Hunan was followed by Zhejiang in January this year (See Policy & Regulation) and several other provinces (see CMM passim).

Late in March, SARFT Director-General Xu Guangchun re-iterated that speeding up the building of large-scale radio, TV and film groups would be the focus of the State's reform of these industries. At the time, Xu was quoted as saying that, " the TV and film companies in the country are too scattered and too weak. They have to join forces to become stronger and more competitive".

Meanwhile, Professor Huang Shengmin of the Beijing Broadcasting Institute has been quoted as saying, "China's radio and TV industries are standing at a crossroad. At a time when domestic competition is heating up, and foreign competitors are at the door, the survival and growth of the companies rely on a breakthrough in their thinking and management and capital support from society".

Echoing sentiments around the country, Huang said that if it missed the chance, the whole industry "will fall into the swamp of clumsiness and low efficiency, as some State-owned enterprises did".

Official reports acknowledged that China's broadcast businesses are still small compared with foreign media giants, noting that the income of the largest player CCTV was RMB5 billion (US$600 million) last year.

What they invariably fail to note is that the new broadcasting and production groups that are literally being handed ownership of the assets and personnel responsible for the real value in the state-owned system are far from owning them in a meaningful post-WTO entry environment.

Indeed, before any talk of individual companies in the international sense can be contemplated let alone Groups, widespread internal confusion and resistance from several key parties at all stages, starting with personnel changes, will have to be resolved along with every current production, distribution and broadcast contract.
The way in which even major cities such as Beijing and Shanghai have been able to play around with ownership of their assets with such impunity will be deeply worrying for international investors. Those with an interest in cooperating with the new Chinese media groups on the real work that undoubtedly needs to be done may well view the current bout of merger mania as truly mad and the reality of acquiring useful assets truly distant.

Nevertheless, as the China Daily was keen to point out in welcoming the new national merger, Viacom, together with other foreign media giants such as AOL Time Warner, Disney and News Corp have already sent their analysts to China to prepare to take a share of the huge market. Few doubt that the shuffling of government assets around and around will have any meaningful effect on the final outcome whatever that may be.