* Nine shares debut just below A$2.05 IPO price
* International cricket rights jewel in Nine's crown
* Pay-TV operators threaten free-to-air sports coverage
By Jane Wardell and Jackie Range
SYDNEY, Dec 6 (Reuters) - Nine Entertainment Co. HoldingsLtd disappointed with a lacklustre debut on theAustralian stock exchange, opening just below its initial publicoffering (IPO) price as investors fretted about the challengesfacing old media.
The former No. 1 ranked station in Australia's free-to-airtelevision market, seeking to claw back ground on rival SevenNetwork, launched the IPO to pay down debt afterstaving off receivership.
Shares in the media and entertainment company opened atA$2.02 on Friday, marginally below its IPO price of A$2.05, andlast traded at A$2.00, valuing Nine at A$1.9 billion ($1.7billion).
The listing comes about a year after U.S. private equityfunds Oaktree Capital Group and Apollo Global Management took control of the company in a more than $3 billiondebt-for-equity swap.
"I was expecting Nine to maybe have a little bit more of abounce, considering that the IPO market had been a little bitstronger this week," said IG markets strategist Evan Lucas.
But with more than 70 percent of profits in 2014 set to comefrom free-to-air television, he said the challenges facing oldmedia were at the front of investors minds as viewers migrateonline.
"You've got to ask the question of how they are going tocontinue to generate (advertising) numbers and generate themoney that they require," Lucas said.
Nine sold 175.9 million existing shares and issued 135million new shares, including 0.9 million at no cost toemployees, to raise A$636 million. The IPO price was at thebottom of the A$2.05-2.35 range.
Its debut was also weighed down by a bearish day in themarket, Lucas said, with the broader market down 0.2 percent.
Nine has had a rocky time since former owner James Packer,son of media mogul Kerry Packer, sold to private equity at thepeak of the buyout boom in two deals in 2006-2008, ending up inthe hands of Oaktree and Apollo.
But ratings have stabilised, it's winning this year in themost important audience demographic for advertisers - peak nightviewing for adults aged 16 to 54 - and may enjoy a viewing boostfrom the current Ashes cricket series.
The listing coincides with the second Test of the biennialAshes series between Australia and England, which is currentlyunderway in Adelaide. A national passion, cricket is the jewelin Nine's crown and a ratings blockbuster for the station.
Major sports events like the Ashes and the National RugbyLeague (NRL), for which Nine has partial rights, are key notonly for the revenue they generate but for advertising upcomingTV shows as traditional networks struggle to retain viewers amida significant shift to online viewing.
"Not only does it attract a good audience but it provides aplatform to promote the rest of their schedule," said LukeSinclair, an investment manager at Karara Capital.
The station earlier this year paid a record A$450 million($411 million) to outbid Ten Network Holdings Ltd forthe five-year international cricket broadcasting rights.
Ten has made no secret under Chairman Lachlan Murdoch, theson of media baron Rupert Murdoch, of challenging for sportsrights. It picked up the domestic Twenty20 Big Bash Leaguecricket for A$100 million and will likely take another shot atinternational cricket in 2018.
Nine is also under challenge from pay television.
Pay-TV operator Foxtel, owned 50/50 by News Corporation and Telstra, already has rights to broadcastmuch of the Australian Football League (AFL) and the NRL, thecountry's two most popular sports.
It is calling on the Australian government to relax strictlaws that prevent sports such as the Ashes, US Open, Olympicsand Wimbledon from being shown exclusively on Pay-TV.
Steve Allen, managing director of media consultancy FusionStrategy, said he did not expect the government would change thelaws at present as this would be unpopular with the electorateas many consumers still see Pay TV as expensive.
Oaktree and Apollo have trimmed their Nine holdings throughthe IPO and will hold 14 percent and 22 percent respectively.