Zee and Star TV coming closer.

Star TV's Rupert Mudrock and Zee's Subash Chandra has decided to work closer. Indications are that Zee and Indian operations of Star is likely to merge.

Zee and Sun TV are the two profit making channels in the satellite TV segment in India. All other channels are loss making. A few are expected to break even shortly.

Murdoch deciding to work closer with Zee is partly because Star TV India is still in the red. Across the globe, Murdoch is reported to have started restructuring his own empire. For instance, he is spinning off his US operations into a new subsidiary, which will be listed on American exchanges. So his moves to rid himself of Star's loss making Indian operations seem reasonable. Last year Murdoch had merged the operation of Star sports with its competitor ESPN to achieve financial viability and reduce the costs.

The Zee Network comprises a clutch of channels like Zee TV, Zee Cinema and Music Asia which do business with various companies, including Zee Telefilms, Ambience Space Sellers (which will soon be merged into ZTL), Siti Cable and Programme Asia Trading Company (PATCO), a TV software export company in which Chandra and associates till last year were minority shareholders.

ZTL exports TV programs mainly to the Hong Kong-based Asia Today for airing on Zee TV. The Zee Network in recent times has been consolidating its position and has also been attempting to increase its earnings through a complex corporate structuring like having companies for export of TV software and Zee Music to supply other types of services too.

For example, PATCO, with Chandra having a minority stake, was formed to export TV software to be aired on Zee Cinema and El TV (renamed as Zee India TV). PATCO in 1996-97 exported programs worth Rs 22.52 crore. Zee Cinema, Zee TV the erstwhile El TV (rechristened Zee India TV, the news channel) are promoted by Subhash Chandra and Rupert Murdoch.

The Zee Network also earns a sizable amount from export of Hindi programs to various parts of the globe where the demand has been on the rise.

Zee Telefilms is currently studying a proposal from Star TV to take over the India specific channels in the Star TV portfolio like Star Plus, Channel V and Star News and Star Movies. If accepted, this would mean an operational pull out by Rupert Murdoch from the subcontinent.

This proposal is understood to be part of the ongoing negotiations between Star TV's Rupert Murdoch and Zee's Subhash Chandra to restructure the scope of the company's activities and re-align the equity holding of the two sponsors.

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