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Media Baron (Int'l Edition)


International -- Asian Cover Story

MEDIA BARON (int'l edition)

Ananda Krishnan is out to make Malaysia a powerhouse from India to Taiwan

It's an easy call. The music video that has just come in from MTV is called "Get Horny" and features a rapper in black leather. He's surrounded by a gaggle of gyrating, leggy women in black tights. To top it off, they've got handcuffs. That's more than enough for the editors in the content-control room of Astro, Malaysia's new direct-broadcast satellite-TV service. "Coupling violence and sex together. That's just absolutely verboten," says Graham Stephens, director of broadcast and production operations and one of about 50 foreigners employed by the company. "Get Horny" gets the ax.

Twenty-four hours a day, the censors monitor MTV and a half-dozen other Western channels, such as HBO, NBC, and ESPN, ferreting out offensive parts before letting the programming air in Malaysia. Astro plays a critical role as a government-sanctioned guardian of Malaysian morals, but it's much more than that. Astro is at the core of what is probably the most ambitious media effort under way in the region. Overseeing it is 58-year-old T. Ananda Krishnan, an oil tycoon and real estate developer with an estimated net worth of more than $1 billion. He wants to create, from scratch, a new business empire and a showcase for the government of Malaysia.

It's an incredibly daring venture: Krishnan envisions a powerhouse network of satellites, digital television, telecommunications, original film-and-television programming in Malaysian, Chinese, and Tamil, even online banking and gambling by phone. By early next decade, the goal is to have millions of customers from Taiwan to India. "There's definitely something to [being] regarded as Asia-friendly," says Krishnan. "And I guess the easiest people to be regarded as Asia-friendly are Asians."

This effort would be daunting for even a seasoned media company that faces no serious competition. But this is new territory for Malaysians, who have long settled for a handful of television stations. And there is serious competition. Rupert Murdoch's News Corp. wants to dominate satellite broadcasting in Asia through Star TV. Other regional moguls, such as Thailand's Sondi Limthongkul, are moving beyond their borders to find new markets.

Yet Krishnan has a powerful ally: the Malaysian government. With their huge scope and technological sophistication, Krishnan's media ventures are key to Prime Minister Mahathir Mohamad's vision of building a fully developed nation by 2020. The government-run investment company Khazanah Nasional bought a 15% stake in Astro last year for $260 million. Regulators have also steadily awarded Krishnan's companies key licenses in such areas as telecommunications, satellites, and gambling. "The government is going to support them no matter what," says one envious Western industry executive. "It's a prestige thing."

It's also a cultural thing. Krishnan clearly intends his media conglomerate to provide Asian alternatives to the Western media offensive. "Asia is not going to sit down and lap up U.S. programming," says Krishnan. Thus, Krishnan's live-action and animation studios in Malaysia, the Philippines, and Vietnam are working overtime to produce shows morally acceptable to conservative Asian audiences. And by censoring MTV and others, Krishnan wants to allay the Malaysian government's fears that more access to world media will corrupt Malaysian values.

BEST OF THE WEST. But Krishnan is certainly not spurning all things Western. Technology from the West was essential in developing Astro, a four-month-old digital service owned by Measat Broadcast Network Systems that allows consumers with special satellite dishes and decoder boxes to receive 20 channels (table, page 23). By next year, Krishnan's companies also aim to introduce through a U.S. subsidiary, banking, stock-trading, home-shopping, and Web-surfing technology for the Astro system. He envisions Malaysian students taking American university classes via Astro. At Krishnan's TV net-work, many of the top managers are American or British. And at Krishnan's telecom operations, many senior executives come from partner US West.

The sheer scope of his efforts has put the spotlight on Krishnan, who built his fortune largely in the oil business. (The name of his holding company, Usaha Tegas, is Malaysian for "Firm Effort.") In a country where most of the elite is Malay or Chinese, Krishnan is third-generation Sri Lankan Tamil, a tiny minority, and he has kept a low profile. Yet over the years, he has built important friendships with such political leaders as Prime Minister Mahathir. "He has the trust of the nation's trustees," says a Western securities analyst in Kuala Lumpur.

A graduate of Harvard business school, Krishnan knows enough about his different businesses to grill employees on bandwidth or game shows. He also makes some special demands. An avid reader of everything from Noam Chomsky's linguistic theory to the history of the Spanish Inquisition, Krishnan sometimes has employees visiting the U.S. bring back dozens of books for him. "He is in many ways a Renaissance man," says American International Group Inc. Chairman Maurice R. Greenberg, who calls Krishnan a "very creative business executive."

Krishnan is playing an important role in fulfilling Mahathir's new dream, a vast high-tech zone outside Kuala Lumpur that the Prime Minister has dubbed the Multimedia Super Corridor. It has already drawn Western giants such as Microsoft Corp. and Sun Microsystems Inc. in its aim to make Malaysia an information-technology power. A Krishnan company is handling the key real estate development of the corridor, Petronas Towers, now the tallest buildings in the world.

MONOPOLY. Mahathir knows that to attract the investors needed for the Super Corridor, the government can't afford to keep the country closed off to foreign information. So it has opened just enough to allow in Astro--but no others. Satellite dishes, once banned, are now allowed, but only the small dishes that get the feed from Krishnan's two Measat satellites. Bigger dishes, such as those needed to get Rupert Murdoch's Star TV without going through Astro's censors, are still illegal.

Despite the government's help, Krishnan is running some huge risks. Astro has sprinted ahead with a speed that has impressed many in the industry, grabbing some 43,000 subscribers since it started four months ago. But the service is expensive, with a high installation cost of $650 and a monthly fee of $34, so some doubt that Astro can reach its goal of 700,000 homes by 2000 out of a total 5 million households. To do so would mean revenue of $650 million a year from the TV service. Krishnan says skeptics underestimate income levels in Malaysia. "The ability of Asian consumers to spend is higher than what's reflected in the statistics," he says. And the price should come down soon when Philips Electronics, which supplies the decoder box, begins production in Malaysia.

Even if Krishnan finds smooth sailing inside Malaysia, the going may be far rougher outside. From the two Measat satellites, the group wants to form joint ventures to beam direct-to-home TV and radio to India, Taiwan, the Philippines, and Indonesia. But having seen the success of DirecTV in the U.S. and BSkyB in Britain, others in Asia have the same idea. For instance, Star TV, which is losing millions in its startup phase, is developing direct-to-home ventures in Indonesia and India. And new satellites are scheduled to go up in the next year from the Philippines, Taiwan, Thailand, and even Laos. "The bandwagon is not big enough to carry all those people who are jumping onto it," says Gary Brown, regional media director for Leo Burnett Co. in Hong Kong. Astro executives say they have an edge since they are already up and running.

They will emphasize programming produced in Asia. "The scramble now is for content, because there is so much crap out there," says Marcel Fenez, a partner at the entertainment, media, and communications group of Price Waterhouse in Hong Kong. Astro's plan is to be sensitive to local political and cultural issues. "It's not good enough to take a lot of programming from the West," says Measat's Chief Operating Officer Paul Edwards, a former Star TV executive vice-president.

HOME GROWN. Productions have included a special for the end of Ramadan, in which Malay actors reenacted scenes from famous old Malay movies. There's a Malay-language Wheel of Fortune and various variety shows, including one for MTV Asia called Lip Service. From its seven studios, Measat will produce 1,000 hours of its own variety, talk, and game shows this year. And Astro has bought more than 1,300 hours of Chinese programming and 500 hours of Malay programming from local producers. "We're trying to get outside houses to get a piece of the cake," says Billy Wong Yew Meng, head of the Chinese Channel. "The whole idea is to develop [local] industry."

In a related effort, Krishnan's eight-channel radio network will devote 20%

of airtime on an all-hits channel to Malaysian and other Asian pop. Starting in April, the radio network will also have a 24-hour talk-radio station, but the usual staples of American talk radio--sex, race, religion, and wacky politics--will be off limits. Likewise, TV game shows must involve skill rather than just chance, lest government officials accuse them of promoting gambling, which is legal for Chinese and other minorities but strictly forbidden for the Muslim Malay majority.

Government sensitivities to gambling may hinder the plans of Krishnan company Tanjong, which has developed an electronic-transaction system for home betting, banking, and stock-trading. While there are no plans now, Tanjong officials hope Astro can air horse races without offending the Muslim majority. "We could make it work on a private-channel basis" that would be unavailable to Malays, says Ng Eng Tong, Tanjong's chief operating officer. Tanjong is also developing multiplex cinemas in Kuala Lumpur with Hong Kong movie studio Golden Harvest and Australia's Village Road Show.

The need for funds for all these efforts is severe. Binariang, the Usaha Tegas company that runs the satellites and phone services, has already spent $700 million on infrastructure and must spend an additional $645 million over the next two years. Both Binariang and Measat plan to sell stock this year, hoping to raise $500 million each.

Not all of Krishnan's ventures have gone well. In 1994, Krishnan sold 20% of Binariang to US West for an estimated $237 million. There's been no rich payoff so far. Because of the highly competitive Malaysian telecom market, the deal hasn't yet worked out as well as the American company had hoped, says Chuck Lillis, CEO of US West Media Group. "The company's not running at a level I'm happy with," he says. "We do have to do some refining of the operations." Chan Chee Beng, head

of corporate finance at Usaha Tegas, says the fixed-line network has signed

up a disappointing 7,000 subscribers.

In India, Krishnan had signed a satellite-broadcast agreement with state broadcaster Doordarshan, but it fizzled when a new government was elected. Another deal is in the works, but it is bumping up against News Corp., which wants to introduce direct-broadcast satellite-TV service in India. Undaunted,

Krishnan's Measat presses on. It is looking to begin broadcasts soon in Taiwan, where industry sources say it will be teaming with TVBS, the Taiwan operation of Hong Kong media tycoon Sir Run Run Shaw. TVB and Measat also have a joint venture to make movies in Malaysia. In the Philippines, Measat hopes to launch by the second half of the year.

Sometimes, when the pace gets too frenetic, Krishnan wonders if he's placing the right bets. "It may well be, two years from now, we'll find it was a critical mistake to have thought we could build all this out," he muses. But then he shakes off the doubts and comes up with even more ideas. Next on his list: pay-per-view movies, Internet services, maybe even a children's channel. If there's one thing this visionary knows, it's how to keep plugging.By Bruce Einhorn in Kuala Lumpur, with bureau reportsReturn to top


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