The future of a pay-TV and Internet joint venture between Star TV and Cable & Wireless HKT has been cast into doubt after Star TV questioned the viability of the proposal.
Star TV, a unit of Rupert Murdoch's News Corp and a leading provider of satellite programming in South-East Asia, said it was still negotiating to develop "an acceptable" business plan before the June 30 deadline for agreement with HKT.
"While we remain bullish about the future of pay-TV service, we do have increased concerns about the viability of the Internet businesses," said Star TV in a statement.
"The cost of operating these businesses using the C&W HKT infrastructure is much higher than anticipated and the lack of subscriber growth on the iTV side is particularly unsettling. As a result, we have not approved any plans to move forward."
Demand for iTV, C&W HKT's video-on-demand service, has shown disappointing growth. The latest figures show that the number of subscribers have risen only 2000 from 88,000 in 1998, with revenue increasing 155% over the same period.
The venture may move forward if either party obtains a pay-TV licence by June 30. As of Monday, May 29, neither side had done so, nor had they asked for an extension of the deadline.
The success of the joint venture has been the subject of speculation ever since Richard Li's Pacific Century CyberWorks defeated a bid by Singapore Telecommunications to buy C&W HKT. Singapore Telecom's bid was partially backed by News Corp.
The venture, in which C&W HKT holds 60% and Star TV 40%, was set up in November 1999 to provide digital pay-TV, on-line home entertainment and Internet services via Star TV's satellite coverage and C&W HKT's broadband network.
Online financial publication Webb-site.com, which had seen the joint venture document, said it was "hard to imagine that PCCW could really want to proceed."
"One of the supposed synergies with HKT is to be able to offer PCCW 'Network of the World' content, much of which is licensed from various sources, across the HKT broadband network," it said.