Gateway Broadcasting Services, a subsidiary of Gateway Communications, has raised an additional $40 million, bringing its war chest for entry into the pay-TV market in Africa to $155 million.
The GTV service will be broadcast in 48 African countries, with initial roll-out starting in East Africa this month.
The company is bullish about its prospects and has stated its intentions to aggressively compete on the basis of price.
However, GTV will not be available in SA in the short-term, as the regulatory environment does not encourage competition, says Gateway Communications president Julian McIntyre.
McIntyre says Gateway Communications initially raised $115 million from the European high-yield bond market in November 2006.
Investors involved in the venture include Kinnevik, a Swedish investment company, and Millicom International Cellular, a mobile telephony company with significant presence on the African continent. Gateway remains the majority shareholder.
Satellite is cheaper
McIntyre says GTV will be a satellite-based service, broadcasting out of Europe into the target countries. "Satellite is perfect for rolling out a service like this because it is cost-effective."
McIntyre adds that GTV will be digital-based, providing good quality for consumers and meeting the requirement of the International Telecommunications Union to provide broadcasting services on a digital platform by 2015.
Competition
McIntyre says GTV will charge its subscribers half of what competitors are currently charging for pay-TV. "People have been over-paying for the service, which made it available only to high-income earners."
Initial roll-out is in East Africa, with Kenya, Uganda and, later, Tanzania as some of the target countries. The service will later stretch to central and southern Africa.
Media reports indicate GTV is already forcing current pay-TV providers to fight for market share in East Africa.
The East African says MultiChoice Kenya has announced a new DSTV family bouquet at a reduced rate. "The move by MultiChoice is no doubt due to GTV`s entry."
However, in SA, consumers will have to wait for the Independent Communications Authority of SA (ICASA) to license new pay-TV players before they get offerings that compete with MultiChoice.
Gateway Communications is not among the 17 applicants currently vying for a pay-TV licence from ICASA.
McIntyre says the company does not completely rule out SA as a potential market. However, the South African market structure, which is complex due to the varied needs of consumers, makes it difficult to effectively penetrate, he explains.
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