Star Unloads Stake in Indias Zee Telefilms

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New Delhi, India -- Following failed talks on merging their
India operations last year, News Corp. chairman Rupert Murdoch and Zee Telefilms Ltd.
(ZTL) chairman Subhash Chandra have decided to end their stormy relationship with a quick
divorce.

News Corp.'s Star TV has agreed to sell its 50 percent
stake in three of Zee's biggest operations back to the Indian partner for $296.5 million.

Star will sell its stakes in Hong Kong-based Asia Today
Ltd., owner of cable and satellite channels Zee TV, Zee Cinema and Zee News; Indian MSO
Siticable; and Patco, a company that provides programming to the Zee channels. Star will
receive half the sale price in cash and the other half in shares of publicly traded ZTL.

"Isn't this a nice thing that an Indian company has
been able to do such a thing?" said Chandra. "This move will create an Indian
media conglomerate."

By becoming a majority Indian-owned company, Zee will be
free of foreign-ownership restrictions that may be included in the country's upcoming
Broadcasting Bill. It could also become a potential partner for state broadcaster
Doordarshan's planned direct-to-home television project.

Star believes it has little to lose by parting ways with
ZTL, especially since Chandra had filed breach of contract suit in a British court in an
effort to block Star's Star Plus channel from transmitting Hindi programming in India and
surrounding countries.

"This deal allows both of us to go our separate
ways," said Rathikant Basu, Star's Indian chairman. "The non-compete clause with
Zee had meant that we could not enter into Hindi programming, which was affecting our
competitiveness. Star Plus plans to substantially increase our Hindi programming but as a
first step, we want to shore up competitiveness of our existing four channels."

Star sources said they were relieved to exit the Asia Today
partnership, a difficult joint venture in which they had no managerial control. ZTL won't
feel much of a pinch, as its channels receive subscription revenues (still somewhat
uncommon in India) and are expected to earn $20 million this year.

ZTL is making an aggressive effort to expand its
international operations. It plans to fold all of its companies under the ZTL banner. In
an August interview, Chandra said the non-Indian operations could be as big as the Indian
operations in three to four years.

"The [separation] will result in better profitability
and better returns for ZTL shareholders, as ZTL will become an integrated media company,
with interests in a variety of fields like broadcasting, print media and the
Internet," ZTL managing director Vijay Jindal said.

ZTL also plans to sell a 10 percent stake to one or more
strategic partners through a share issue. Time Warner Inc. and Viacom Inc. are among the
media companies that have shown an interest in acquiring a stake in ZTL, according to ZTL
officials.

"We are not looking at just one strategic investor in
ZTL. It can be more than one, but the [limit] of shareholding will be 10 percent,"
said Jindal. "The company will use money earned from the share sale to pay Star for
the stake it is selling."

ZTL recently agreed to transmit Nickelodeon on the
Siticable MSO, according to a local news report.

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