Shenzhen Media SA plans to get Telkom Media up and running in the African broadcasting space by the end of this year.
While the company declines to divulge what exactly it plans to do with the business, it says it has “specific objectives within the African media space”.
Telkom surprised the industry yesterday when it announced it had sold its stake in Telkom Media to Shenzhen, after months of failed negotiations with potential buyers.
Telkom Media had been tipped as the strongest pay-TV applicant to compete against the likes of MultiChoice's DSTV.
A few months after Telkom Media was awarded its licence, it had already published its first round of briefs for the production of local content, set up a guide to its standard terms of trade and had set several production deadlines.
Those deadlines would have seen the broadcaster's first flight in June last year. However, Telkom's decision to reduce its majority investment in the business sent Telkom Media reeling and the company has been treading water ever since.
According to Telkom, Telkom Media's last employee headcount sat at 103, although rumours abound there may be fewer, with employees preparing for what was to be a wind-down of the business.
What can be done?
Frost & Sullivan ICT industry analyst Lindsey Mc Donald says it will be extremely difficult for Shenzhen to compete against a company like MultiChoice and may have to start with a niche offering first. This is despite Telkom Media's existing technologies and future planning.
“MultiChoice has also grown incrementally, adding channels and bouquets as they went along,” she says.
None of the other remaining pay-TV licensees have decided to compete head-to-head with the broadcasting giant. Walking on Water will be a religious broadcaster, and On Digital Media has not yet indicated what niche it will service.
However, Mc Donald says it is possible for the Chinese business to make a deal with a US company or UK business, like Sky, and use a partnership to compete in the media space.
Shenzhen, along with its empowerment partner Imbani Media, says Telkom Media will be renamed as soon as regulatory processes have been completed. “The company has plans to be operational in the fourth quarter of 2009 and has specific objectives within the African media space.”
Telkom wins, sort of
Meanwhile, Telkom is pleased the process is finally over. The company is in the middle of a restructuring and can scarcely afford to keep Telkom Media if it is to compete in its core industry.
According to Telkom's executive for corporate strategic development, Christo Worst, Telkom was heading towards a tough financial situation with Telkom Media, which could have amounted to an R8 billion loss over the next few years.
Worst says the company invested a total of R470 million in Telkom Media. Neither Shenzhen nor Telkom will reveal how much Telkom Media was sold for, although it seems to be a marginal amount.
However, Worst did indicate the spur-of-the-moment sale did not cover Telkom's investment in the broadcaster, which would point to a sale figure of far less than R470 million. “The sale did help to reduce our cost of investment, however. We will complete the impaired investment and write it off as a loss,” he explains.
Shenzhen says it will make an announcement about Telkom Media's future “shortly” and will call a shareholder meeting to deal with investor-related issues.
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