Murdoch cedes control of Chinese TV channels

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Rupert Murdoch has sold a majority stake in three of his Chinese TV channels to a private equity fund backed by the government in Beijing.

The decision marks a shift in News Corporation's strategy in the country and fuelled speculation yesterday that the media mogul could retreat from China, where his company has struggled to break through despite a long-standing commitment to the market.

News Corp announced yesterday that it had agreed to sell a controlling stake in the television assets to China Media Capital (CMC), the country's first buyout fund specifically focused on the media industry. The terms of the deal were not disclosed.

News Corp said it would retain "a significant stake" in the business but the company would not reveal how much. It added: "Both partners aim to develop the business by exploring new growth opportunities."

Mr Murdoch's decision to cede full control prompted speculation that News Corp has become frustrated with the control the Chinese authorities continue to exert on the country's media, despite encouraging commercialisation. There have also been suggestions that Mr Murdoch's son James, an increasingly powerful force within the company, is not convinced that News Corp's efforts in China will bear fruit in the near future.

However, insiders at the business rejected suggestions that the sale of the TV stakes signalled News Corp's retreat from China. Alongside the remaining holding in its Star TV business, News Corp also has a 17.6 per cent holding in Phoenix Satellite Television, which runs three channels, as well as the Chinese operations of subsidiaries Dow Jones and MySpace. One possibility is that partnering with local state-owned operators may accelerate its expansion. A source close to News Corp said the move would help "open up the region".

Jack Gao, the chief executive of Star China, will take over as head of the joint venture, which will be based in Beijing, and have offices in Shanghai, Hong Kong, Guangzhou and Chongqing. The company's entire staff of 70 is moving with him.

James Murdoch, who is chairman and chief executive of News Corp in Europe and Asia, said: "The agreement with CMC recognises the value we have created in Star China and enables us to continue to grow it for the future."

Rupert Murdoch bought Star TV in 1993 and has been forced to make a series of concessions to the Chinese government, including barring the BBC from his satellite platform broadcasting in the region.

The state has consistently turned down his requests to make and broadcast programmes in the country.

Mr Murdoch has recently expressed frustration about his operations in China. In October last year, he gave an address in the country calling for a more open media industry.

A year ago, he restructured News Corp's Asian business, getting rid of almost a third of the company's staff in Hong Kong to focus on the Indian market. At the time, 75 per cent of Star TV sales came from India.

Yesterday's deal will see CMC take control of News Corp's two general entertainment channels, Xing Kong and Xing Kong International, as well as Channel Mainland China, a music channel aimed at young people. The move also includes the Fortune Star Chinese movie library, which has a total of 757 Chinese-language titles.

Li Ruigang, chairman of CMC, said: "This is an extension of our long-term co-operation with News Corporation."