CA Grants Approval-in-principle for Forever Top’s Shareholding in i-CABLE


The Communications Authority ("CA"), in stage one of its assessment of the applications ("the Applications") for proposed changes in the shareholding structures of Hong Kong Cable Television Limited ("HKCTV") and Fantastic Television Limited ("Fantastic TV"), granted its approval-in-principle for Forever Top (Asia) Limited ("Forever Top") to hold between approximately 39.89% and 54.02% of the voting shares in i-CABLE Communications Limited ("i-CABLE"), upon completion of the issue by i-CABLE of new shares to its shareholders by way of an open offer ("Open Offer") and the conversion of a loan facility provided by The Wharf (Holdings) Limited ("Wharf") to i-CABLE to new shares to be issued by i-CABLE to Wharf ("Loan Capitalisation") before the issue of offer shares.   Both the Open Offer and Loan Capitalisation are triggered by the equity injection plan into i-CABLE, the major shareholder of HKCTV and Fantastic TV. 

In granting the approval-in-principle, the CA is satisfied that the introduction of Forever Top as a new investor of HKCTV and Fantastic TV is in compliance with the relevant regulatory requirements under the Broadcasting Ordinance (Cap. 562) ("BO") and the concerned television broadcasting licences.

The CA notes that the equity injection into i-CABLE would provide the company with new equity capital and funding to support the licensed services of HKCTV and Fantastic TV, enabling them to meet their respective investment commitments under their licences.   The CA's approval-in-principle would enable i-CABLE to proceed with its Open Offer and the Loan Capitalisation according to its proposed timeline, thereby facilitating the equity injection by Forever Top into i-CABLE. 

In stage two of the CA's assessment of the Applications, on the basis of the results of the Open Offer and the Loan Capitalisation before the issue of offer shares to be submitted by HKCTV and Fantastic TV by September 2017 as per i-CABLE's timeline, the CA would review and upon confirmation of the compliance of the two licensees with the relevant regulatory requirements, grant its formal approval for the changes in the shareholding structures of HKCTV and Fantastic TV, including the shareholdings of Forever Top and such other parties (where appropriate) in i-CABLE.

Under its licence, a domestic free television programme service ("free TV") or domestic pay television programme service ("pay TV") licensee is required to apply for the CA's prior approval for any change in its shareholding structure.   The CA, in processing an application for changes in the shareholding structure of a free TV or pay TV licensee, would need to be satisfied that upon completion of the proposed shareholding changes, the licensee will continue to comply with all applicable regulatory requirements under the BO, including fit and proper person and residence requirements, non-subsidiary requirement (in the case of free TV licensee) as well as restrictions on disqualified persons and restrictions on unqualified voting controller (in the case of free TV licensee).  The CA would also need to be satisfied that the licensee will be able to honour the commitments it has made under its licence.

i-CABLE announced its plan in May 2017 to raise capital through issuing new shares by way of an Open Offer to its shareholders in August 2017 and by completing a series of transactions proceeding at different timelines consecutively by October/November 2017.   According to i-CABLE's proposal, Forever Top will hold between approximately 39.89% and 54.02% of the voting shares in i-CABLE upon completion of the Open Offer and the Loan Capitalisation and become the new major shareholder of i-CABLE. 

HKCTV and Fantastic TV submitted the Applications for the CA's prior approval in May 2017, and provided further information and clarifications in July 2017.  The CA noted that the Open Offer, the Loan Capitalisation and the related proposed transactions would proceed in different stages, and it would not be possible for the two licensees to submit to the CA at this point in time with any certainty as to the outcome of the proposed transactions and the resulting shareholdings of other parties in i-CABLE during different phases of the proposed transactions, and to confirm their compliance and that of all persons exercising control of them with the relevant regulatory requirements.   As such, the CA is not in a position to grant, at this stage, any prior approval to the shareholding changes of the two licensees.

Taking into account the exceptional circumstances of the proposed transactions, while striving to be as facilitating as possible as regards the equity injection plan, the CA decided to adopt a pragmatic approach for handling, in two stages, the Applications of HKCTV and Fantastic TV as follows -   

  1. at the first stage of its assessment of the Applications, the CA is prepared to grant an approval-in-principle now for Forever Top to hold the voting shares in i-CABLE within the specified range upon completion of the Open Offer and the Loan Capitalisation before the issue of offer shares. In granting the approval-in-principle, the CA would need to be satisfied that the introduction of Forever Top as a new investor of HKCTV and Fantastic TV will be in compliance with the relevant regulatory requirements; and
  2. at the second stage of its assessment of the Applications, on the basis of the results of the Open Offer and the Loan Capitalisation before the issue of offer shares, the CA would carefully review further information to be submitted by HKCTV and Fantastic TV within three working days therefrom and consider granting, within two weeks upon receipt of such information from the two licensees, formal approvals for the shareholding structures of the two licensees, including the shareholdings of Forever Top and such other parties (where appropriate) in i-CABLE, upon confirmation of the licensees' compliance with the relevant regulatory requirements.

The two-stage approach would retain in the CA its regulatory oversight of the complicated shareholding change applications which involve a series of complex transactions proceeding at different timelines consecutively before reaching the final state, while enabling i-CABLE to proceed with its equity injection plan as per its proposed timeline.  

That the CA is prepared to treat the Applications of HKCTV and Fantastic TV as exceptional cases is due to the unusual nature of the proposed transactions.  The CA's handling of the Applications should not in any circumstances be taken by the licensees or any other person as a precedent for future cases.  The licensees have been reminded to ensure that, whenever possible, the CA's prior approval should be sought for any future changes in their shareholding structures.

Communications Authority
Secretariat

20 July 2017

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