Terrestrial Cable Mergers Cause Internal Strife

BEIJING --- Problems inherently associated with the current high speed mergers between local terrestrial and cable systems are emerging as China's TV industry attempts to force through reforms designed to create combined TV Groups able to compete in post-WTO markets. (See also SARFT Minister: Large-sized TV Groups to be this Year's Agenda'.)

The SARFT order to complete mergers by Summer 2001 has resulted in serious internal disruption as local government departments move to establish new management structures and re-allocate profitable parts of the broadcast system to newly formed holding ventures.

Most obviously affected are senior TV station officials, many of whom are now feeling the brunt of previously unaired complaints from their colleagues and who are the subject of intense investigations as anti-corruption units aim to uncover previous abuses of power.

In Hunan, the central authorities are continuing an investigation into illegal commercial activities relating to Hunan Educational TV which was created by the advertising department of the provincial broadcaster Hunan TV, but which operated as a separate channel.

The crackdown was initiated as a result of broadcasts criticizing the current CCP leadership, but has already resulted in the removal of several senior leaders and is purported to be threatening the activities of some of the commercial subsidiaries established by Hunan TV, though not Hunan Dianguang which is already listed on the Shenzhen Stock Exchange.  (See also 'Mainland Media Company Dianguang Chuanmei Reports Profits and Plans'.)

Meanwhile, other major cities are also seeing vicious internal fighting as officials jockey for positions in the newly combined Radio & TV Groups. According to sources in Beijing, the situation is critical in the capital as Beijing TV and Beijing Cable TV attempt to force agreement on the merger of two of the country's most profitable broadcasters.

Although the merger plan is designed to prepare Chinese media for WTO competition, the speed at which the mergers are being forced through means that the majority of reforms are superficial in nature and reflect a re-organization of assets rather than a serious move towards establishment of commercial "Groups" in the international business sense of that word.

The result, fear many insiders, is that the merged entities will actually be worse positioned to react to international competition and provide even easier pickings for non-government enterprises looking to acquire or invest into media sectors. In particular, the insiders warn that the human resources systems proposed for the new Groups are ostensibly the same as before and provide few incentives for talent to remain in the state sector.

At the same time, the mergers have created uncertainty within broadcasters at the highest levels, leading to a direct effect on business as officials defer from making major decisions. Although this is not generally affecting the work of programming and other operational departments, it is effectively ending all reform attempts currently underway in many stations, including the policy of separating production resources from broadcast resources.

According to one official in Beijing, international companies should not be under any illusions that China's new TV Groups will become serious commercial ventures that can co-operate at new levels with foreign partners. "Rather", he said, "this should be seen as a largely cosmetic effort to give a better impression of the Chinese broadcast system for WTO reasons. The reality is that this is little more than a name change that provides an opportunity to weed out officials who have become too strong or who have upset higher level leaders".