CHAPTER 1

INTRODUCTION

1.1 BACKGROUND OF STUDY

Newspapers, television and radio networks are the fundamental mass communication

tools directed at when discussing the mass media industry in modern day Malaysia.

However, when it comes to commercialized mass media communications, it was the

newspapers that paved the way in the Malaysian media industry. In Malaysia,

commercial publishing and distribution of newspapers is traceable to the era of British

colonial Malaya. The New Straits Times Press (Malaysia) Berhad (NSTP), the

publishing company related to the New Straits Times, has its origin in Singapore in

1845 (NSTP-About Us, 2007). Other newspapers gradually came around particularly

to serve the different ethnic communities in the country such as the Malays, Chinese

and Indians. The result is a media market with newspapers in vernacular languages of

Malay, Chinese and Tamil apart from English.

Modern day Malaysians have at their disposals 31 known newspapers and tabloids

(Press Reference, 2007, October 28) that cover the market in the Peninsula, Sabah and

Sarawak (Refer Appendix A). The prominent newspapers include the New Straits

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 Times, the Star, Berita Harian, Utusan Malaysia, Sin Chew Jit Poh, Nanyang Siang

Pau, Tamil Nesan, Malaysia Nanban, Sarawak Tribune, and New Sabah Times.

In the area of broadcast media, private television came about with the establishment

of Sistem Television Malaysia Berhad (STMB), TV3, in 1983 (MPB Corporate

Profile, 2006). Private television broadcasts became more competitive beginning

1996, when MEASAT Broadcast Network Systems (MBNS) was established and

Astro (Satellite) TV began operations [Astro All Asia Network (AAAN) or ASTRO -

Company Background, 2006) offering 22 television and eight radio channels

following the launching of the Malaysian satellite, MEASAT-1 (Company

Background, AAAN, 2006).

The current research identified two types of private TV services namely the free-to-

view networks and the pay-to-view networks. Operators of free-to-view networks

include Media Prima Berhad which operates four free-to-air (FTA) channels (Fact

Sheet, MPB, 2006) and Vision Four Media Corporation which operate one network,

Vision Four. Astro (Satellite) TV operates 56 pay-to-view channels (Company

Background, AAAN, 2006). Entities that include Cosmos Discovery Sendirian

Berhad, MiTV, and Fine TV concentrate on cable-TV services.

Where private radio networks are concerned, ASTRO operates eight networks

(Company Background, AAAN, 2006) while MPB operates two (Fact Sheet, MPB,

2006). Others are radio networks individually operated by organizations and small

size entities that include Red104.9, 988FM, Best 104FM, CatsFM, IKIM.fm, THRfm,

SinarFM, XfreshFM, and SuriaFM (Refer Appendix B).

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 At this point, the two1 most prominent players in the local media industry are Media

Prima (Malaysia) Berhad (MPB) and MEASAT Broadcast Network Systems

(MBNS). These corporations have platforms in print media, broadcast media, film,

and advertising.

Utusan, The Star Publications, companies of Sin Chew Media Corporations, the Tamil

language newspapers that include Tamil Nesan, Makkal Osai, and Malaysia Nanban

concentrate on print media products. Equally involved in newspaper publishing are

companies servicing Sabah and Sarawak such as Inna Kinabalu Sendirian Berhad,

Sabah Publishing House Sendirian Berhad, Borneo Post Sendirian Berhad, and Harian

Borneo Sendirian Berhad which are responsible for publications of regional

newspapers.

The media industry in Malaysia is fast catching up with the global advancement in

technology that has opened the way to new businesses including Internet based

services and satellite assisted communications as observed with the availability of

online newspapers that include Utusan-online, theStar-online, and NST-online.

Privatisation has a part in the general growth of economic activities in Malaysia.

Historically, the move to privatise public services is believed to be influenced by

forces beyond the control of the state. In discussing the taxonomy of decision-making

(Dimmick & Coit, 1982) in relation to privatisation in Malaysia, Rahmah (1993)

suggests that the supra-national and pan-national level influence had induced the

nation’s decision to adopt privatisation schemes into its economic development

1
Private companies licensed to operate electronic and print media only. Radio and Television
Malaysia is not taken into account.

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 programmes. International agencies such as the US Agency for International

Development (AID), UNESCO, the World Bank, and the Asian Development Bank

were instrumental in instigating Asian nations including Malaysia to adopt

privatisation, backed by the US government (Rahmah, 1993).

In Malaysia, privatisation introduced by the government was centrally planned

through the New Economic Policy of Malaysia. There are arguments as to the motives

or agenda behind the privatization scheme in Malaysia. Mimicking the then Reagan’s

administration privatization agenda to ease the State’s financial burden, the Malaysian

government embraced privatisation fundamentally to ease the government’s financial

pressures in providing public services, which is especially so in the period of the

1981-1983 recession (Rahmah, 1993).

Tan (2002) and Gomez (2001) observe privatisation in Malaysia as a capital

accumulation strategy. Tan (2002) is of the opinion that the motive for privatisation

by the Malaysian government is fiscal reasons. Gomez (2001)-117, views

privatisation as a “rent-seeking” tool for the creation of the “new rich”. Discussing the

politics of privatisation, Gomez (2001)-91; 99, points out the presence of political

interference or “political patronage” in the privatised entities. Rahmah (1993) on the

one part observes that as much as the government releases its hold on its public

sectors, there is a tint of cautiousness, politically, when letting out public services into

the hands of private sectors. This is sensible enough in view of Tan’s (2002)–28

perception of the Malaysian political arena as a ‘battleground’ for different factions of

Malaysia’s elite and middleclass.

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 In the Malaysian context, privatisation involves two major schemes, namely

corporatising selected government-run agencies, or “state assets” (Gomez, 2001) and

expanding licensed services by the issuance of new licenses to private operators. In

the broadcast media, STMB or TV3 was the first to benefit from the issuance of new

licenses policy. The policy led to the birth of more television channels that include

ntv7, 8TV, Ch-9, and Astro (Satellite) TV.

As earlier mentioned, the growth and development of the Malaysian media industry

dates back to 1845, marked by the commercially circulated English language

newspaper, the then Straits Times. What followed was the growth of the local media

industry with the establishment of a number of privately owned publishing

companies. For a long time, the local media companies operated independently and

diligently subscribed to the internal expansion mode for their growth and

development. However, of late there have been incidences indicative of a “change-in-

the-making” of a growth trend of media corporations in Malaysia.

1.2 STATEMENT OF THE PROBLEM

In late 2006, there was an attempted merger by the NSTP upon Utusan

(BiznewsDatabank, 2006, December 1). The merger bid did not materialise (Bursa

Malaysia, 2007, January 18) but the incident had captured the attention of the

Malaysian public and brought to their awareness the presence of such a corporate

action by media companies, more so at a time when a top local Chinese language

newspaper company, the Nanyang Press Holdings, had just undergone a takeover

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 exercise culminating in a convergence with Sin Chew Daily in October 2006

(Rimbunan Hijau Group, 2007).

The attempted merger instigated unfavourable responses from the Malaysian public.

Website hosts such as Malaysia Today, Asia Media Forum, and Centre for

Independent Journalism Malaysia (CIJ) actively carried responses from the public

expressing their uneasiness over the intended merger. Illustrative of the concerns

harboured by the Malaysian public with regard to the merger bid was a joint petition

calling for a media law reform endorsed by a total of 18 civil societies representing

such movements as writers and journalism bodies, youth associations, and women’s

associations (Refer Appendix C). The move is akin to the move by social activist

groups in the United States that forwarded a joint petition to the US Federal

Communications Commissions (FCC) on June 4, 2002 (White, 2002). The petition

was in request for the FCC to scrutinise rule changes with regard to media

convergences that would eliminate or loosen the limits on media ownership. The

petition was supported by organizations such as Consumers Union, Media Access

Project, National Council of La Raza, National Association for the Advancement of

American Colored People (NAACP), and the National Urban League with the

contentions that the rule changes pertaining media convergences opens the way for

the formation of mega media corporations.

The issue regarding the NSTP-Utusan merger attempt reached a level where members

of parliament and senators voiced their concerns over the merger intention (Rocky’s

Bru (2006, December 13) with a note of objection. The Malaysian Prime Minister

contended that the NSTP-Utusan merger attempt as an endeavour to strengthen the

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 financial positions of the company (NSTP, 2006). Social activists on the other hand

were more concerned with the implications on media democracy such as the “freedom

of speech”, “freedom of the press”, and the “right to information and differentiated

opinions” and media mergers lead to a “one nation – one paper” environment

(WAMI, 2006. Also Refer Appendix C).

The fracas and the objections about media mergers gave an impression that the

phenomenon of corporate convergence, or merger and acquisitions (M&A), in the

Malaysian media industry is not welcome with contentions that it threatens freedom

of speech and freedom of the press in the country. Such an impression places the

relevance of M&A in the growth and development of the Malaysian media industry in

a grey area that calls for a discussion.

In general, it is duly recognised that in the course of a company’s growth and

development, M&A is applicable at some points and is only left to the discretion of

the management to take up the option. It is unclear if the mode of growth by M&A is

a trendy phenomenon in the Malaysian media industry. If so, how is M&A deployed

as a strategic corporate tool and in what manner it benefits the media industry?

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 1.3 AIM OF RESEARCH

The research is an attempt to explore the adoption of M&A in the growth of the media

industry in Malaysia, working on the general proposition that a trend in the modern

day growth and development of the media industry is facilitated by M&A activities.

The research investigates an instance of the deployment of merger and acquisitions in

the corporate growth of a local media operator presumably indulging in external

expansion practices.

1.4 THE RESEARCH QUESTIONS

This research recognises the business responsibilities of media operators in general, to

develop sustenance in the industry locally as well as globally. Taking cognizance of

the environmental influences that govern their operations, it is the immediate interest

of this study to find answers to the following research questions.

(a) What is the pattern of growth displayed by Media Prima (Malaysia) Berhad
[MPB]?

(b) What is the direction of growth displayed by the deployment of M&A by

MPB?

(c) Who and what drives the adoption of M&A in MPB?

(d) What would be the implication(s) of M&A, as presumably exercised by MPB,

on media ownership in Malaysia?

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 1.5 SIGNIFICANCE OF STUDY

Studies on M&A commonly concentrated on post-merger outcome discussing the

impact of the endeavour on the economic performance of the surviving entities.

Previous studies on M&A in Malaysia have not specifically addressed situations in

the media industry. In her book, “Malaysian Mergers and Acquisitions: theory and

selected cases”, Fauzias (2003) highlighted cases of M&A in Malaysia involving

companies dealing in miscellaneous types of businesses from different industries. A

topic of interest to the current research is “Prediction of Corporate Takeovers: An

Empirical Studies of Malaysian Firms”.

The outcome of the research would serve to explain or justify the deployment of

M&A as a strategy for growth in the media industry as well as provide a stepping

stone to future empirical studies on the development of the Malaysian media industry.

1.6 LIMITATIONS OF STUDY

The issue of the research is observed through the business perspective of the media

industry, limiting investigations and discussions to business oriented functions. The

research concentrates on a selected media company as a case for research in view of

the scarcity of a large sample. The number of established players in the Malaysian

media industry is small and corporations that own multi-platform media assets that

include print media and broadcast media are particularly recent and limited in

number.

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 The research is an act of threading into the affairs of a business organisation where

corporate information is understandably confidential. The research concentrates on

factual information thus pitching its investigation to the examination of documents

related to the entity in question and the theoretical concepts that complement the

research. Access to the necessary information is solely through documented facts

released by the corporation on its corporate website and other links such as, Bursa

Malaysia and Malaysian Communications and Multimedia Commission (MCMC).

The research confined its methods of information gathering to document search in

view of the situations where the investigation is not one of opinion seeking facts about

the subject of research are sufficiently available for the purpose of study at this point.

The research is concerned with the commercial media operations that include

newspaper publishing, private radio and television broadcasting, film and video

production, and advertising run by media operators in Malaysia. Government owned

radio and television stations operated by Radio-Television Malaysia (RTM) are

excluded.

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