Standing Guard
Multichoice, which is 75% held by MIH (a Naspers company), is expected to face fierce competition for the first time from next year. The Independent Communications Authority of SA (Icasa), which regulates the broadcasting and telecommunications industries, will in the next few months license operators keen on giving the DSTv operators a run for its money. As many as 18 consortia are bidding for licenses, though it’s not yet clear how many of them will secure the required licenses from Icasa.
Multichoice has come under fire from prospective rivals for “profiteering” from its monopoly status. In the year to March 2007, its SA operations (including its 60% share in M-Net and Supersport) recorded a profit after tax of R1,77 bn. That’s more than 80% of the Naspers group’s profits after tax of R2,19bn in the same period.
But Multichoice CEO Nolo Letele strongly defends his company’s prices and says it has introduced bouquets – DSTv compact (R199/month) and DSTv Select (with Vodacom, R139/month) – that make satellite TV affordable to people in LSM categories 4-7. DSTV premium, which costs R440/month, will continue to be aimed at LSM 8-10, Letele says.
However, he warns that margins will come under pressure as new rivals fight to gain traction in the market. “We see price wars happening and margins being affected, and we will see churn where people migrate to competitors. Content rights will become more expensive as competitors bid for these channels,” he says. “Ultimately, this means our revenue may be affected in some way.”
But Letele is in a fighting mood. Multichoice, he says, will vigorously defend its turf. It will do this by:
- Launching Internet Protocol TV (IPTV), where TV is delivered to consumers over broadband phone lines. Telkom Media plans to offer both satellite-TV and IPTV services and Multichoice wants to take the fight back to the fixed-line operator by offering IPTV services of its own. Telkom has to allow other service providers, including Multichoice, access to its telecom infrastructure to provide such services.
- Ensuring that it keeps premium sporting events. If Multichoice were to lose the rights to broadcast a key sport to a competitor, it would have a “big impact on our business”, according to Letele. The company’s recent five-year deal with the Premier Soccer League, in which it obtained the right to broadcast all local PSL football matches, is seen by analysts as a significant victory in its efforts to fend off competitors, particularly at the entry level of the market.
- Launching a broadcast website over which DSTv subscribers can watch streamed video. Popular local shows such as Carte Blanche and Binnelanders will be made available on the website within 24 hours of being broadcast. The website will be launched commercially by year-end but will only work reliably on high-speed, fixed-line broadband connections.
- Providing high-definition (HD) TV broadcasts. Multichoice will have a test HD channel live by October, though it will only be viewable by company employees. “We are finalizing our business plans around HD,” says chief technology officer Gerdus Van Eeden. “It’s just a matter of time before we offer it.”
- Launching mobile TV for cellphones. Multichoice already has an extensive pilot project under the DSTv Mobile brand and hopes to launch the service commercially as soon as it gets the go-ahead from Icasa. Government may throw a spanner in the works, though – Communications Minister Ivy Matsepe-Cassaburri has said she wants only one mobile TV network to be built; Multichoice has lodged an objection. Letele predicts that Telkom Media, which has raised as much as R7,5bn in debt, will be Multichoice’s toughest competitor. But, he says, “until the rubber meets the road, it’s hard to quantify these things. We wil have to wait and see what the competitors will do.”
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