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Murdoch's Man In China (Int'l Edition)


International -- Asian Business: HONG KONG

MURDOCH'S MAN IN CHINA (int'l edition)

Can Gareth Chang expand News Corp.'s mainland beachhead?

Few businessmen can boast of better connections with Asia's political elite than Gareth C.C. Chang. And boast he does. "I know Habibie very well," says Chang, referring to the President of Indonesia. "Vincent Siew is a very good friend of mine," he says of Taiwan's Premier. And most important of all, Chang knows both Chinese President Jiang Zemin and Premier Zhu Rongji.

The ability to cultivate contacts in high places has served Chang's career well over the past two decades, first as point man for McDonnell Douglas' attempts to land big deals in China and Taiwan, and then at Hughes Electronics, where he helped set up a satellite-broadcasting operation in Japan. Now, the 55-year-old Chang, a U.S. citizen who was born in China, is tackling one of his biggest challenges yet: turning around Rupert Murdoch's Asian satellite network, Star TV."BEARING FRUIT." Murdoch needs all the goodwill he can get. News Corp. has spent $870 million since 1993 to buy the network. But Star has been a big money loser. Last year, it lost an estimated $80 million on sales of $140 million. Murdoch's strategy for turning Star into a broadcasting gold mine akin to Europe's BSkyB rests heavily on building a major presence in China. After years of run-ins with Beijing, in 1996, News Corp. and two Chinese partners managed to start the Phoenix Channel, which claims to beam news, sports, and entertainment to 45 million Guangdong households. "His efforts in China have been bearing fruit," says media analyst Craig Connelly of J.B. Were & Son in Melbourne.

As Star's new executive chairman, Chang has as his mission building on this foothold and expanding News Corp.'s reach into everything from local programming to professional sports. With Southeast Asian economies in tatters, Chang will focus on India and Greater China. He plans to introduce direct-to-home satellite service in Hong Kong and Taiwan next year and wants to do the same in China, although some analysts say a South African concern has the inside track. "He's been told to get something going in China," says one Hong Kong media executive. "And he's got a year, a year and a half to do it."

Trouble is, Chang has difficulty translating his connections into successful deals. As the head of Asian operations for McDonnell Douglas, he worked for more than a decade to land a Chinese order for 200 narrow-body aircraft. McDonnell built a huge aircraft factory in Shanghai and gave its Chinese partners a big role in supplying major sections of MD-90 series aircraft. But China's airlines, loyal to Boeing, bought only a few dozen McDonnell planes. Chang's effort to save McDonnell's commercial aircraft unit by forging a consortium with Taiwan to build a new jumbo jet also failed. Eventually, McDonnell was taken over by Boeing.

Chang ran into different problems after joining Hughes in 1993. To launch DirecTV--Hughes's satellite-TV service--in Japan, Chang deftly maneuvered through Tokyo's bureaucracy. But DirecTV is getting trounced by News Corp.'s Sky PerfecTV, which has five times as many Japanese subscribers.

More controversial was Chang's role in 1994 in hiring a Canadian citizen named Jun Shen as a manager for a Hughes satellite program. Shen, 33, who has a doctorate in computer science, is the son of Lieutenant General Shen Rongjun, who helps run China's space program. The hiring became part of a U.S. Congressional probe into possible transfers of American aerospace technology to China's military. Chang calls the suspicions "absolutely absurd," and Hughes denies Shen had access to military secrets. Still, the State Department has revoked a license allowing Shen to work on the satellite project. Worse for Hughes, Washington has held up approval of a $600 million satellite sale to China as the probe continues.

Despite these embarrassments, Murdoch sees Chang as an asset. In Asia, analysts say, he is perceived as a foreign executive governments can trust. In 1993, Murdoch enraged leaders from Beijing to Kuala Lumpur by boasting that satellite TV would undermine dictatorships. Chang, in contrast, talks about wanting to develop more Asia-based news shows to counter perceived bias in Western reporting. Now, Chang has to prove that cozying up to powerful leaders really can pay off in profits.By Bruce Einhorn in Hong Kong, with bureau reports


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