Telkom Media still in limbo

By Candice Jones, ITWeb online telecoms editor

Johannesburg, 29 Sept 2008

A year after Telkom Media was awarded its commercial broadcasting licence, the company sits in limbo, waiting for a possible investor handover.

"We are waiting for Telkom to announce how the discussions have progressed with our possible investors," says Telkom Media spokesman Chris van Zyl. He says in the meantime, the company is concentrating on streamlining its internal operations.

Parent company and 66% shareholder Telkom decided to reduce its investment in the broadcaster in March, just before Telkom Media's planned mid-year launch.

The company would not provide details about which companies are potential investors, or the amount it needs to raise to meet the R7.5 billion that was initially budgeted for the start-up. However, Van Zyl says the business is still running.

All ears, no words

Explaining the funding cut, Telkom CEO Reuben September emphasised Telkom's decision was not due to any concerns over Telkom Media's TV business plans.

"Supported by an independent third party, we have conducted an in-depth review on the business and we believe Telkom Media's business model is sound. However, we have to consider that media companies have very long pay-back periods and we have several initiatives - with shorter payback time frames - which are competing for limited funding."

Telkom's international financial statement (20F), published in June this year, says the telecoms giant had already invested R326 million (up to the end of March this year), and was required to provide an impairment provision of R217 million. "If Telkom is not able to procure a purchaser for its investment, it could incur additional losses from the investment, and its reputation and relations with ICASA could be harmed."

The company also confirmed it was hoping to make a decision "in the near future". Industry had expected an announcement at this year's annual general meeting; however, no communication around Telkom Media was released at that time.

Telkom's decision to walk away from its broadcaster has also raised questions around its rights to a licence. However, the Independent Communications Authority of SA may well be waiting for a decision around the shareholding before it makes a conclusion around the licence itself. ICASA was not available for comment at the time of publication.

Ready and waiting

Telkom Media has been ready to get started since November last year, when it announced details on technology purchases and infrastructure. Expected technologies included services over satellite, online and IPTV. Van Zyl said, at the time, that the company had researched best of breed technologies to ensure it is able to provide its content over the various platforms.

The company was also in discussions with several content providers for entertainment and sports shows that were expected to go live anytime between June and August. Van Zyl could not elaborate on what the company is currently doing with respect to content development.

Since its launch, Telkom Media made more progress than its new pay-TV competitors and was tipped by analysts as the leader in the new pay-TV applicant race. Before Telkom decided to pull its investment, the company was also expected to provide stiff competition to incumbent pay-TV broadcaster MultiChoice Africa.

Other pay-TV licensees were E-sat, which bowed out of the race, favouring its position on a 24-hour channel on DSTV; Walking on Water and On Digital Media, neither of which have launched a commercial service yet.

Telkom was unreachable at the time of publication.