SPH plan to hive off media business gets MCI support

Singapore Press Holdings (SPH), which publishes The Straits Times, has received the Government's support for its plan to hive off its media business into a new company limited by guarantee (CLG), as part of SPH's ongoing strategic review.

Announcing the move yesterday, SPH chairman Lee Boon Yang said that the transfer will enable the media business to focus on quality journalism and invest in talent and new technology to strengthen its digital capabilities.

Signalling its support in a statement yesterday, the Ministry of Communications and Information (MCI) said the Government is prepared to provide funding support to the CLG, to help it accelerate its digital transformation and build capabilities for the future.

It has also given its in-principle approval for the shareholding and other relevant restrictions under the Newspaper and Printing Presses Act (NPPA) to be lifted from SPH, upon the closing of the proposed restructuring.

Minister for Communications and Information S. Iswaran will deliver a ministerial statement on the subject when Parliament sits on Monday.

Under the plan, all of SPH's media-related businesses will first be transferred to a wholly owned subsidiary, SPH Media Holdings Pte Ltd. SPH will provide the initial resources and funding by capitalising SPH Media with a cash injection of $80 million along with $30 million worth of SPH shares and SPH Reit units, and SPH's stakes in four of its digital media investments.

SPH Media will later be transferred for a nominal sum to a newly formed public CLG - an entity which does not have share capital or shareholders, but instead has members who act as guarantors of the company's liabilities.

The CLG will be run on a commercial basis, but all profits made will be reinvested into growing its media business, focusing on its mission. The CLG structure will also allow SPH Media to seek funding from public and private sources.

The transfer of the media assets to the CLG is subject to SPH shareholders' approval at an extraordinary general meeting, which will be called in early July. Upon shareholders' approval, the restructuring is set to be completed by October.

SPH said in a statement the media industry has faced "unprecedented disruption" in recent years, with SPH's operating revenue halving in the past five years, largely due to a decline in print advertising and print subscription revenue.

SPH's media business saw its first-ever loss of $11.4 million for the financial year that ended on Aug 31 last year. "If not for the Jobs Support Scheme, the loss would have been a deeper $39.5 million," it said.

Dr Lee said there is little scope for further cost cuts without impairing the ability to produce quality journalism. And while digital circulation had surpassed print circulation, the growth in digital advertising revenue will not make up for the drop in print advertising.

The losses of the media business are likely to continue and widen.

Dr Lee said the fundamental issue that needs to be addressed is the long-term viability of SPH Media in its present structure, subjected to market pressures. "SPH shareholders are not likely to tolerate the continued negative impact that the media business has on the company's financial prospects. On the other hand, we cannot allow a functioning, trusted and respected media organisation to be whittled down over time by market pressure and commercial constraints.

"In the context of Singapore's multiracial society, SPH serves a crucial function by providing news and information in vernacular languages to serve Singapore's diverse ethnic communities."