Suggestions that all was not well with TopTV’s financials became more apparent after the pay-TV broadcaster announced yesterday that it had applied for business rescue and was looking for a new equity partner.
On Digital Media, the holding company for TopTV, is likely to seek an investor from within the industry.
“The best source of a cash injection would be a current industry player who could be in a position to assist with other strategic resources that would take time for TopTV to accumulate,” the company said.
TopTV said it battled to find an appropriate partner due to the competitive landscape and the legislative requirements that limited a foreign investor to only a 20 percent ownership.
Richard Hurst, a senior analyst for emerging markets at consulting firm Ovum, said TopTV’s predicament was an indication of the large investment required to sustain a broadcasting operation.
“When MultiChoice rolled out they had one channel and grew from that but everyone expects a bouquet [of channels]. Content agreements also cost a lot. TopTV may have to look at advertising but the key with pay-TV is [advertising] is not what [viewers] want, that is why they pay. It’s going to be very difficult,” Hurst said.
TopTV, a satellite pay-TV broadcaster, burst onto the market in 2010 to rival DStv, a satellite pay-TV incumbent managed by MultiChoice, which is a subsidiary of media conglomerate Naspers.
Naspers had launched DStv in 1995 and prior to that had been operating M-Net, its analogue subscription-based TV service from 1986.
Hurst said when MultiChoice saw TopTV entering the market, the firm began restructuring its packages and launched enhanced technology and services such as personal video recorder (PVR). The larger firm also devised packages for the lower-income groups, which was a key market for TopTV.
“On paper there is supposed to be opportunity for other companies to jump into this market,” Hurst said.
He said TopTV would need to devise more compelling offerings but also consider targeting higher-income groups.
“Other new entrants will find it even more difficult than TopTV. There is room and space for TopTV,” he added.
Eddie Mbalo, the TopTV interim chief executive, said a turnaround plan that the company implemented earlier this year had delivered good performance and the bottom line had improved. Limited funding was obtained and injected into the business.
“This is the strongest position the company has been in since inception. However, the business has always required a significant cash injection to recapitalise it in order to complete the turnaround and take the business to the next level of competitiveness,” Mbalo said.
He said the decision to apply for a business rescue under section 129 of the Companies Act would provide a “protective bubble” and buy time to find a strategic equity partner. “We believe that this decision will cement our commitment to transparent business practices, while we continue our battle on what we hope will become a more transformed landscape and level playing field.”
TopTV’s other equity partners include the National Empowerment Fund, SES, the Industrial Development Corporation and the Development Bank of South Africa.
Those contacted could not comment by the time of going to press.