Murdoch's Star snaps up India portal

Now India's Internet bubble has burst, its portals are consolidating at bargain prices

By CNN's Alex Frew McMillan and wire reports

BANGALORE, India -- Rupert Murdoch's Star group has taken control of Indya.com.

Star, owned by Murdoch's News Corp., already held 37 percent of the Internet portal.

But Star said Thursday it will now buy out Indya.com's founder, Pradeep Kar, and its other investors to give it almost full ownership.

Gary Walrath, a Star executive vice president, will now take over as chairman of Indya.com. Sunil Lulla will continue as CEO.

Star paid $50 million for its original stake. Walrath said it is paying less than that to expand its stake, though terms weren't disclosed.

A likely bargain

Star is likely getting a bargain, as India's portals shake out.

Despite the country's population of more than 1 billion, India's Internet boom has not come as quickly as hoped.

Around 5 million people use the Web in India. That is expected to quadruple over the next three years, to 20 million.

But Internet advertising is drying up around the world. With India's Internet bubble bursting, a shakeout is underway with its portals. Multimillion-dollar prices paid for stakes last year have crashed to earth.

Bangalore-based Indya.com, launched in April 2000, is one of India's smaller portals. The investors that Star is now buying out also include Chase Capital, ICICI group and Apple Computer founder John Sculley.

Star hopes that taking it over will help it parlay its strong television brand into Web success, both in attracting viewers and advertising.

It froze its Internet spending in June.

Star dominates TV

"This is the start of the consolidation phase," said Rajesh Jain, who serves on the advisory board of competing portal Sify.com. "There are no prizes for being an also-ran in this business."

Hong Kong-based Star says its television programs account for 38 of India's top 50 programs. Shows such as Kaun Banega Crorepati, the highly popular local version of Who Wants To Be A Millionaire, are shown on cable in India.

It is consolidating investments there, where it owns a stake in the cable operator. Star has been promoting Indya.com heavily on television.

Sify.com, run by Satyam Infoway, Rediff.com and Indiatimes.com, run by the Times of India, are the top Indian portals. U.S.-based Yahoo and Hotmail also command high market share.

The CEO of Satyam Infoway, R. Ramaraj, told CNN in June that he expected only two or three of India's seven nationwide portals to survive.

Reuters contributed to this report.