New pay-TV monopoly

South Africans hoping for greater choice in the pay-television market are in for a disappointment. Regulator Icasa had promised to introduce the equivalent of cable services into the market as a way of offering greater choice.

The cable-equivalent services work on the same basis as cable, where subscribers pay to access a bouquet of television channels, but in South Africa, Internet Protocol Television (IPTV) will be used as the delivery mechanism.

The idea is that consumers can choose either rival satellite services or select from a range of cable services.

But the DStv rivals are still to come to market and the Mail & Guardian has learned that the cable option has been given on a monopoly basis to a single company.

The firm is Super5Media, formerly Telkom Media—the only licensed cable provider in the country.

The main benefactor of Icasa’s decision to license a single player in the IPTV market is Chinese-led consortium Shenzhen Media SA, which purchased the monopoly licence from Telkom.

The M&G understands that Telkom sold its 75% shareholding in Telkom Media to Shenzhen Media SA for next to nothing, despite the fact that it had a monopoly on cable television in South Africa.

Industry insiders told the M&G that Shenzhen had paid Telkom R20-million for Telkom Media, in which Telkom had invested R470-million and where it has R20-million in cash sitting in the firm.

Three players applied for cable licences, but Telkom Media was the only successful applicant.

It is unclear where this leaves players such as MultiChoice, which are already rolling out a triple-play service that includes supplying IPTV to gated communities through its subsidiary Smart Village.

Smart’s website boasts that it already has more than 1 000 homes signed up to its triple-play service.

Telkom chief executive Reuben September has been accused of a lack of leadership and many analysts have queried Telkom’s long-term business strategy. This is likely to increase the pressure on September and the board.

Both Telkom and Shenzhen Media SA refused to comment on the sale price of Telkom Media, claiming the information was confidential.

Super5Media will offer a bouquet of channels that are delivered via the internet for a monthly subscription fee.

It is unclear whether other forms of IPTV, such as video on demand, would be regulated by Icasa.

Super5Media’s competitors claim that Icasa has flouted due procedure by issuing it with a new licence and that there should have been a public process.

On Digital Media (ODM) lawyers sent Icasa a letter pointing out the irregularities in the issuing of the new licence, claiming that, in fact, it is null and void.

However, Super5Media director Tian du Pisanie says the initial licences issued by Icasa, which were technology neutral, were not compliant with the Electronic Communications Act and that the new licence issued by Icasa was compliant.

“Icasa has issued Super5Media with the correct licence as far as the Act is concerned,” says Du Pisanie.
“Technology neutrality is not something that exists.

“ODM are our competitor so they have their own reasons they don’t want us to come to market,” says Du Pisanie.

Icasa issued Super5Media with a new licence a few weeks ago and has given the firm 60 days to sort out its new shareholders’ agreement and to illustrate that it will not contravene the foreign ownership limit of 20%.

Du Pisanie told the M&G this week that it did not contravene the foreign ownership limit because 80% of Shenzhen Media SA was owned by local company Imbandi Media and only 20% was held by Chinese company Sino-Africa Development Group, an effective 15% shareholding in Super5Media.

However, Shenzhen Media SA is still in negotiations with its minority shareholders to finalise the shareholders’ agreement.

The minority shareholders include Given Mkhari’s MSG Afrika Investments, Anant Singh’s Videovision and the Women’s Development Bank, which, together, own 25% of Super5Media.

The relationship between the minority shareholders and Telkom broke down when, after agreeing to liquidate the company, Telkom inked a deal with Shenzhen and then presented it to the minority shareholders as a “fait accompli”.

The minority shareholders’ response was to resign from the board and to write to Icasa expressing their dissatisfaction with the way the transaction was handled.

“At the time there were decisions being made without consultation, even though we were on the board,” says Singh. “We felt like we were being marginalised.”

Another source close to the minority shareholders says that the decision to withdraw from the board had to do with corporate governance concerns.

The source said discussions between Shenzhen and the minority shareholders were continuing and had been “relatively fruitful” up until this point.

Singh said it was too early to comment on the negotiations.

Meanwhile, Super5Media recently retrenched 22 more staff members employed when the company was called Telkom Media.

The M&G understands that Super5Media will face a number of legal challenges to the retrenchment process. Icasa said for legal reasons it could not comment on the issuing of the Super5Media licence.

Lloyd Gedye

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