This includes parties such as installers, one source revealed, who incur expenses to the tune of R500 per job that they have to claim back from TopTV.
It is understood that a number of installers will not be doing any more work for the satellite pay TV operator until they are given guarantees that they will be paid for it.
According to our source, TopTV will be appointing someone to oversee the business within the next 2 days as part of its recent application for business rescue.
Ten days after that, the person will be able to answer questions on payment guarantees.
TopTV’s application for business rescue comes after the company had already told contractors that it was decreasing its installer subsidy.
Previous information received by MyBroadband indicated that TopTV had reduced the labour component of the subsidy from R420 to R300 while the dish kit subsidy remained unchanged at R225.
More details on TopTV’s plight emerge
In the letter which bears a commissioner of oaths stamp dated 31 October 2012, interim CEO of TopTV, Eddie Mbalo, explained the series of events that led to ODM applying for business rescue.
ODM was launched in May 2012 and has been in a loss-making position since then, the letter reads. This means that the business has been reliant on funding provided by its shareholders and debt funders.
The letter goes on to say that this is typical of the curve that pay TV operations go through while building their subscriber base to the break-even point, however.
According to the letter, ODM has been in discussions with several parties potentially interested in becoming an equity partner.
On 1 October 2012, it continued, the business was granted R150-million from the Industrial Development Corporation and National Empowerment Fund, its major institutional shareholders.
This money was to keep ODM going for a further three months with the hope that a deal with one of the potential strategic equity partners could be finalised.
On 29 October 2012 the ODM board learned that one of the potential partners had withdrawn its interest in the company. The letter said that after this the board no longer believed ODM could finalise a deal before its cash reserves ran out.
For this reason there was no option but to conclude that the business was in financial distress and that voluntary business rescue was the best option, with the following plan being adopted:
- The cash reserves of the business can be extended by delaying the payment of existing creditors;
- The expenditure that was planned for the three month period can be revised in order to conserve cash; and
- More time can be bought in order to continue the negotiations with the remaining interested parties, in the hope of concluding a funding deal with a strategic equity partner.