The future of TopTV, which has been up in the air since last year, is set to be decided today as the pay-TV platform's creditors and shareholders meet to deliberate amid a surprise buy-in bid backed by rival MultiChoice yesterday.
MultiChoice has emerged as the potential saviour of TopTV parent company On Digital Media (ODM), in a move that would see the pay-TV giant fork out millions to keep its smaller rival afloat, and in local hands.
This comes as an eleventh-hour offer to buy out and rescue TopTV has been submitted to counter that of Chinese tech firm StarTimes - and Naspers-owned MultiChoice, which runs DStv, has agreed to fund the bidders to the tune of R500 million.
The new bid, by Dynamic TV Consortium - a broad-based black economic empowerment (BEE) group led by local businessmen Given Mkhari of MSG Afrika Media, and Malose Kekana of Falk Trading - came to light yesterday, four days after MultiChoice approved the group's request for funding.
MultiChoice started offering pay-TV to South Africans with DStv in 1995 and, although TopTV launched in 2010 to rival the service, it has failed to capture the market amid content challenges.
Competition issue
While the involvement of a rival player in the rescue of TopTV may raise concerns around potential competition issues, Absa Investments analyst Chris Gilmour says it is a fascinating move - and one that, if anything, is good for competition.
"DStv is acutely aware that there is no real competition in SA." Gilmour points out there have been a number of pay-TV hopefuls in recent years that have folded (for example Telkom Media), while SABC is "by no stretch of the imagination competition for anything".
Gilmour says it is in MultiChoice's interest to have healthy competition - and for the company to fork out the pocket-change amount of R500 million is nothing. "It is a clever move on their part and it shows that they welcome competition - at least on the face of it - and that they are putting their money where their mouth is."
Ultimately, says Gilmour, content is key. "TopTV will never pose a threat [to DStv] because they just don't have the access to content, and that is what counts at the end of the day." He says MultiChoice has a huge competitive advantage in that it has, over the years, gained access to the cream of the crop in terms of content.
He says the local bid lends the advantage of national interest to the mix. "[A buyout by the local entity] would mean that the company does not need to go the Chinese route, and so the structure of TopTV would remain local, which is a good thing."
Foreign facade?
The Dynamic TV consortium has accused StarTimes of "fronting" in its bid to buy into TopTV. Mkhari and Kekana believe the foreign firm's involvement would negate the strategic objectives of BEE in SA, and fail to result in any meaningful value to TopTV's black shareholders.
TopTV's main shareholders are the Industrial Development Corporation; Cosatu's investment arm, Kopano Ke Matla; the National Empowerment Fund; global satellite company SES; and First National Media Holdings.
Dynamic TV stressed the importance of empowerment in a statement yesterday, suggesting StarTimes would take profits out of the hands of South Africans.
"StarTimes claims to enable 65% black shareholding, with only a 20% black economic interest in the business. This [is a] sophisticated version of 'fronting'. To further entrench this mirage, StarTimes refers to a new BEE partner but does not identify this partner, making it unclear and uncertain who the ultimate beneficiaries are."
The total amount of investment by South African development funding institutions and investors in ODM is over R1.4 billion - which StarTimes has proposed to acquire for R98.4 million. Dynamic TV says this implies that the first R1.4 billion in profits from TopTV must be repaid to StarTimes and repatriated offshore, tax-free, before local shareholders can benefit.
StarTimes already has licences and registered companies in 10 African nations - having been issued the first digital TV operator licence by Rwanda in 2007. Its operations network currently covers Nigeria, Tanzania, Uganda, Rwanda, Burundi, the Republic of Central Africa, Guinea and Kenya.
Gilmour says, should the local bid succeed, MultiChoice's involvement in TopTV would likely end at the funding it is offering for "enterprise development".
In terms of the likelihood of MultiChoice sharing the content wealth, Gilmour says: "This move by DStv demonstrates they are serious about competition - but perhaps not serious enough to share its content."
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