Beijing's reluctance serves to stall a new media merger

The proposed $1.7bn merger of Sina and Focus Media, two of China's leading privately owned new media companies, appears to have been a step too far for Beijing, which refused even to consider the deal, according to people familiar with the situation.

The two Nasdaq-listed companies said this week delay in government approval for the deal had affected business. They had decided to abandon the merger, announced in December last year.

Instead, the management of each company issued new shares to itself in the last week at what appear healthy discounts to current prices - but are based on recent average price levels, the companies say.

Neither company would speculate about the reason for the Ministry of Commerce's reluctance to rule on an anti-monopoly review that was needed for the deal to proceed.

But people familiar with the government's thinking say the country's powerful state-owned media conglomerates were unhappy with the pairing of Sina, a top web portal, and Focus, the country's biggest video screen advertising company.

While maintaining their role as conduits for the Communist party's political propaganda, the companies are also lucrative media conglomerates and command the lion's share of the burgeoning advertising market.

They are protective of their privileged market position. That makes life very hard for any privately owned media upstart that becomes big enough to be seen as a threat.

Exclusive goes mass-market

Apple's iPhone, once only selectively available, is about to roll out in such far-flung and impenetrable places as South Korea, China . . . and, for Brits, the local Orange or Vodafone store. This won't take a big bite out of Apple's appeal, which owes more to ease of use and aesthetics than exclusivity. But it will change the dynamics for just about everyone else. Even South Korea, which reckons its array of home-made state-of-the-art phones will render the iPhone something of a damp squib, could be in for a surprise. In similarly tech-savvy Japan, people queued overnight to get their hands on the iPhone. Notwithstanding that many of the functions had been available for years on domestic handsets, and in far more colours.

In the UK, exclusivity has played into the hands - and till - of O 2 . Bernstein Research estimates that, like other European operators with exclusive deals, O 2 has garnered all its top-line growth during the past three quarters from the iPhone. The application- heavy handset contributes 14 per cent of service revenues, Bernstein estimates. No wonder. iPhone users are big users, with average monthly spends half as much again as O 2 's non-iPhone customers. Hence the bleeding of customers and revenues at rival operators Orange, Vodafone and T-Mobile. Consumers' hope is that the big four (soon to become three with the merger of Orange and T-Mobile) battle it out on prices to win a bigger slice of the lucrative business. Alas, the odds of meaningful price cuts are not good. Network operators already subsidise handset sales heavily, making it harder to fund a price war which benefits none of them. Rather, non-exclusivity leads to less switching, a more equal spread of the spoils among network operators - and more iPhones wedged or plugged into ears, from Tiananmen Square to Piccadilly Circus.

A fresh energy mantra

Mention "smart grids" to most power engineering people and watch their faces light up. The idea that adding sophistication to electricity distribution networks and to home and office metering could solve many of the world's long- term energy problems has become a new mantra to executives at electrical engineering groups such as Siemens, ABB and Aveva.

The idea is sound. Against rising demand, only better management of existing electricity distribution facilities will allow generators to avoid having to build massive networks, that might be hard to fund and nearly impossible to justify environmentally. And only by moving to "smart" demand - enhanced ability for electricity consumers to choose how and when they use power - can renewables such as wind and solar power be harnessed effectively.

Even carmakers have been roped in - as the plethora of electric vehicles at this month's Frankfurt motor show showed. Many electrical engineers expect battery-powered cars to provide not only mobility, but also much-needed storage facilities for electricity from sources, such as wind or waves, that are not as reliable as traditional power stations.

Reality is a little different. Experiments in steering electricity consumption by intelligent metering, where consumers are given technology to allow greater choice, are scant. True, work at the distribution level is more advanced, but even this is only partial. And the idea that millions of electric cars will provide massive storage capacity is more fanciful still. No wonder that, for every engineer electrified by the idea of "smart grids", there is one switched off by the hype.

world.view@ft.com