Star TV, News Corp's Asian broadcast subsidiary, and Cable & Wireless HKT have called off their plans to set up a joint venture pay-TV and Internet service in Hong Kong.

The two companies' only explanation for the "mutual and amicable" policy reversal was that they no longer shared the same vision for the future.

James Murdoch, who this week was announced as chairman and chief executive: said "We had concerns about the business model and the partners couldn't decide the best way to go forward."

Earlier this week, Star voiced grave doubts about whether agreement could be reached before the June 30 deadline (Screendaily. May 30). "While we remain bullish about the future of pay-TV services, we do have increased concerns about the viability of the Internet businesses," it said 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."

Demand for iTV, C&W HKT's Video-on-Demand (VoD) service, had shown disappointing growth. The latest figures show that subscriber numbers had risen by only 2000 from 88,000 in 1998, with revenue increasing 155% over the same period.

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.