Star, Zee Seen as Extending Ties

New Delhi, India -- Executives at Hong Kong-based Star
Television and India's Zee TV are in the process of negotiating a deal that,
according to sources, will see Rupert Murdoch's News Corp. simultaneously widen its
investment in India and hand over management control of it all to Zee TV chairman Subash

Star, a subsidiary of News Corp., has had a fractious
relationship with Zee in recent years. They've had a 50-50 partnership for Zee's
stable of program channels and its systems companies. But the new agreement aims to mend
the rift and to extend Murdoch's 50 percent stake into Chandra's amusement-park
group, Zee Telefilms Ltd., as well as into the Zee Ambience ad agency and overseas
channels housed in the Zee Multimedia unit.

The deal could help to alleviate Murdoch's ongoing
political problems in India, which have weighed on his investments there. Earlier this
year, for example, a warrant was issued for Murdoch's arrest. Chandra, while strapped
for cash, has considerable political clout in India.

Effects from the merger will be felt across South Asia. The
new entity, valued by Goldman Sachs & Co. at $3 billion, would have seven channels in
India alone. However, some pruning of more costly operations is expected.

Currently, Star and Zee are at considerable odds over the
price. Zee originally wanted $250 million for the stake, but it was lowballed by
Star's $50 million counteroffer. According to sources, Chandra is willing to settle
for $90 million

Zee, meanwhile, has indicated that it wants Zee Network CEO
Vijay Jindal to head the new company.