Telkom Media rethink
YOU have to sympathise a bit with Telkom Media. The division was given a full mandate and pots of money to drive what could have become a convergence strategy.
Then the rug was unceremoniously pulled out from under it, with Telkom doing a U-turn and deciding not to invest in a new cash intensive business with no prospects of a quick return.
The Public Investment Corporation (PIC), which is rapidly emerging as a major saviour of business deals that have hit hard times, is now rumoured to be willing to help pick up the tab with other investors.
But you have to ask whether this is a sensible allocation of pensioners’ money.
Naspers’s MultiChoice now has such a head start on the market that the chances of becoming a successful competitor to it have to be in question.
It’s obviously undesirable for one company to have such a dominant position in the market so, in principle, best of luck to Telkom Media.
But the fact that MultiChoice is so dominant means the capital expenditure competitors will have to incur to win market share will be huge. A long walk to profitability looms for Telkom Media.
If Telkom itself has decided the venture is not worth supporting — at least not if it is seeking profit in a reasonable timeframe — then quite why the PIC finds it attractive is puzzling.
Telkom at least has the network, the customer base and some of the technology skills to contribute to the venture. Once it sells out, the media venture begins to look quite flimsy. Its success will depend on which other investors it can persuade to take a stake.
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