Almost all Chinese households have access to television

Tom.com, the media and internet company headed by Hong Kong-based tycoon Li Ka-shing, is buying a share in the company for $37m.

AOL's decision to sell its controlling stake in China Entertainment Television (CETV) continues its withdrawal from the Chinese market which was previously thought to offer huge opportunities for foreign media players.

It comes as the company is trying to shore up key media assets in the United States following 2002's losses which, at $100bn, were the largest recorded in history.

"They're basically telling Tom.com to run the show for 6 or 8 years... The buy back offer is very attractive if they do want to get it back," said Vivek Couto, an analyst at Media Partners Asia.

AOL won the rights to broadcast in the southern Guangdong province in 2001 as what was then seen as a first step towards reaching China's billion-plus television viewers.

An estimated 94%, or over 300 million households, have televisions, of which approximately 100 million are serviced by cable or satellite channels.

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But AOL - the first foreign television network to gain such access in China - captured less than 2% of the market in its first 18 months in operation, analysts say.

In March, AOL put on hold a much-vaunted $200m (�127m) venture to offer internet services in China.

It had signed the deal two years ago with Legend, China's biggest computer maker, but never launched the service.

Legend argued that there was too much competition in the Chinese internet market to justify such a large investment.

'Valuable foothold'

Tom.com - once an internet start-up - is now a multi-media group involved in the print media, outdoor advertising, sports event marketing and online platforms.

Under the terms of the deal, it has committed to assume all funding obligations for CETV up to a total of $30m for 30 months.

"It provides us with a valuable foothold in the huge but tightly regulated China television market," said a Tom.com executive.