Telkom Media sale 'months away'

By Christelle du Toit, ITWeb senior journalist

Johannesburg, 18 Jul 2008

While majority shareholder Telkom talks to an undisclosed number of interested parties to back its aborted venture, the new pay-TV player-in-waiting, Telkom Media, is still being backed as a winning bet.

After spending R325 million, Telkom is looking for someone else to take over the cost of the pay-TV operations.

According to Naas Fourie, chief of strategy for Telkom SA, "several potentially interested and suitable investors were identified and approached directly" subsequent to Telkom's decision to disinvest from Telkom Media.

Industry insiders have confirmed there are a number of parties interested in the business, but say it could still be months before a deal is concluded.

According to analysts, buying into Telkom Media could prove to be a wise business move, even though the station was already supposed to have been on air this month.

Lindsey McDonald, Frost & Sullivan industry analyst, says if Telkom Media's new investors can come through soon, there is still a strong business case to be built for the endeavour.

"There is so much infrastructure development going on right now, they have to get on air as soon as possible," she says. "There has not been anyone else that has managed to get on air and take their potential market share (other than the incumbent MultiChoice), and the idea behind Telkom Media remains a good one."

Craig Terblanche, business and technology advisor at Marketworks, says if one tales a long-term view of any investment in Telkom Media, the losses it's making at the moment are not such that it makes the business less viable.

"This [pay-TV] is a huge industry," he says. "It is not like venture capital where you have a 50/50 chance at success - it is a substantial industry with substantial opportunity."

According to Terblanche, "if you are in a position to be in this space [pay-TV], you should stay there, there is no question about it".

Hanging in there

Meanwhile, Telkom Media is sitting tight, and biding its time.

Telkom Media spokesman Chris van Zyl could not say this morning what the company's potential revenue losses are while it is not on air.

However, he says Telkom Media has not experienced a staff exodus subsequent to Telkom backing off from the venture, as staff "have been hanging in there".

"We believe in what we are doing," he says. "The business is viable and while things are slow, we will be looking at our business plan when new investors come in."

Telkom's Fourie has said: "Since the decision to significantly reduce its investment in Telkom Media, the company [Telkom] has restricted funding to cover essential operational costs only. Telkom will continue funding in this manner until the current process is concluded."