Dynamic TV Consortium, a broad-based consortium led by Given Mkhari of MSG Afrika Media and Malose Kekana of Falk Trading confirmed that it has submitted an alternative plan for the business rescue of On Digital Media (ODM), the operator of Top TV.
The consortium said that, on 24 April 2013, the board of MultiChoice approved funding of R500 million, “for the purposes of implementing a credible business rescue plan and securing the on-going sustainability of ODM”.
BusinessTech contacted MultiChoice, who were unable to provide feedback before the time of publication.
On 29 October 2012, ODM resolved to commence business rescue proceedings after experiencing financial distress for an extended period of time. On 17 April 2013, a rescue plan was published.
The plan provided for China based pay-television firm StarTimes Communications Network Technology, to acquire and operate the business of ODM.
Dynamic TV Consortium noted that the total amount of investment by South African Development Funding Institutions and investors in ODM is in excess of R1.4 billion of which StarTimes has proposed to acquire for a cash consideration of R98.4 million.
“This implies that the first R1.4 billion in profits must be repaid to StarTimes and repatriated offshore, tax free, before local shareholders can benefit,” it said.
The bidding consortium said that one of the primary objectives of the Electronic Communications Act is to “promote the empowerment of historically disadvantaged persons”.
As a result of this objective, industry watchdog, Icasa awarded Pay-TV licences to four new players, including ODM who was the only licensee that launched a satellite subscription service, in Top TV.
“It therefore follows that a turnaround of ODM’s fortunes presents the only realistic opportunity for the Pay-TV market to have a credible second player providing diverse content and choice for the average South African.”
“This also represents a rare opportunity for Black people to own a commercial broadcasting licence, generally considered to be a scarce resource and asset of national interest,” Dynamic TV Consortium said.
Andile Khumalo, CIO at MSG said: “It would appear that the shareholding structure of the StarTimes plan circumvents the foreign ownership restriction provisions of the Electronic Communications Act. StarTimes claims to enable 65% black shareholding, however with only a 20% black economic interest in the business.”
“This sophisticated version of ‘fronting’ undermines the strategic objectives of BEE as it will probably not result in any meaningful value to the black shareholders. To further entrench this mirage, StarTimes refers to a new BEE partner but does not identify this partner, making it unclear and uncertain who the ultimate beneficiaries are,” he said.
The SA based consortium said it would look to promote a successful South African business; support local manufacturers, distributors and installers; and stimulate the independent production of locally developed, home-grown African content.
“Having analysed ODM and the market, Dynamic TV believes there is a gap for another viable Pay-tv operator. The business rescue plan is designed to be implemented in a way that promotes the developmental objectives of South Africa,” the group said.
“The StarTimes plan may also adversely affect local manufacturers and content providers. StarTimes is likely to source its decoders and other technology products from its holding company and affiliated offshore foreign subsidiaries.”
“We are concerned that their plan may not result in any skills transfer, but instead become a displacement of local skills. In short, we seek to build a credible and sustainable South African Pay-tv broadcaster,” Khumalo said.