Tag: MultiChoice

Naspers to unbundle and list MultiChoice

By Nick Hedley for Business Day

The transformation of Naspers, which was founded more than a century ago to produce Dutch-language newspaper De Burger, into an online-only behemoth is almost complete.

Africa’s most valuable company, which owns a 31% interest in Chinese internet giant Tencent, said on Monday it planned to unbundle its pay-TV business MultiChoice onto the JSE.

Naspers will hand its interest in the DStv operator to its shareholders.

Investors cheered the news. After falling 3.2% earlier in the day, in line with Tencent’s decline in Hong Kong, Naspers rallied to close 0.7% up at R3,206.42, valuing the company at R1.4-trillion.

Naspers hopes to list the new entity MultiChoice Group, which includes its local and rest-of-Africa pay-TV business along with Showmax Africa and security company Irdeto, in the first half of 2019. The unbundling will cap off a remarkable transformation at Naspers, which was mostly a publishing and pay-TV business until its 2001 investment in China’s Tencent.

Naspers would not raise funds through the deal, said CEO Bob van Dijk, but its shareholders would benefit as the market currently ignored MultiChoice when valuing the group.

In its sum-of-the-parts valuation, US bank JP Morgan calculated that Naspers’ majority-owned MultiChoice unit is worth $8bn. More than 90% of that value sits in SA, according to the bank. That implies that MultiChoice Group is worth more than Shoprite.

Van Dijk said Naspers plans to give MultiChoice SA’s BEE investors another 5% stake in the local pay-TV business. “Besides unlocking value for our shareholders, maybe more important we think it will also unlock value for [BEE scheme] Phuthuma Nathi, which is already one of the most successful broad-based BEE schemes.”

He said Naspers will continue to invest in its SA e-commerce businesses, which include Takealot, Mr D Food, PayU and AutoTrader. “In the last year, we invested more than R3bn in the e-commerce businesses in SA alone. We expect to continue to invest and we’re looking at interesting prospects.”

It will also retain its interest in Media24, which is moving quickly into online publishing. The pay-TV market was poised for further growth despite pressure from internet-based rivals such as Netflix.

“Even in markets like Europe, people still have traditional TV services and on top of that people have connected services. In Africa the story is even more positive — you see very significant growth in traditional TV … as well as decent take-up already in SA of [streaming services] DStv Now and Showmax. I’m confident it’s a growth story.

“I feel confident about putting the business on its own legs.”

Robert Pietropaolo, a trader at Unum Capital, said the unbundling would be positive for Naspers “but the pressure will certainly be on MultiChoice to stay competitive”.

“MultiChoice themselves have already started cutting their headcount and they have started offering lower-tier packages, which unfortunately does not bring in the desired revenues. MultiChoice will not only have to be nimble from now on, but I think they may have to re-invent themselves to be competitive,” Pietropaolo said.

In the year ended March, the pay-TV operator lost 41,000 premium subscribers across its African markets. Even though the total subscriber base grew — MultiChoice added 563,000 users in SA in the year to March — this growth came from far less profitable lower-cost packages. However, the company remains highly cash generative. Over the same period, MultiChoice generated revenues of R47.1bn and trading profits of R6.1 bn.

MultiChoice SA CEO Calvo Mawela said the company had slowed the decline in high-margin premium subscribers. It lost more than 100,000 of these customers in its 2017 financial year but reduced that number to about 40,000 in 2018.

“Our focus on Premium is beginning to bear fruit.… We’ll continue to focus on Premium to ensure that we do not see further decline in Premium subscribers going forward.”

Job cuts loom at DStv

By Chris Forrester for Advanced Television

According to a report in South Africa’s Sunday Times newspaper, pay-TV operator DStv is laying off up to 200 staffers in a move to save cash amidst increased competition.

A DStv spokesperson said the move was in order to create a leaner and more agile business. Existing staff are being asked to reapply for their jobs, says the newspaper.

DStv’s parent, MultiChoice has lost some 41,000 Premium top-tier subscribers in the year to March 31st.

MultiChoice has made no secret of its annoyance that rivals such as Netflix and Amazon Prime are eating away at its core subscribers and yet operate without having to fulfil the licensing obligations faced by MultiChoice.

MultiChoice CEO Calvo Mawela has called for a change in regulations to cover the new OTT entrants.

Netflix retaliates in DStv battle

By Lynsey Chutel for Quartz

For months, the chief executive of South Africa’s biggest TV company, MultiChoice, has suspected Netflix was messing with him and the rest of the DStv parent company. Calvo Mawela was clearly spooked, yet it seemed laughable that relative newcomer, Netflix South Africa was going after DStv in particular, until it actually turned DStv’s corporate paranoia into a joke.

To market to South Africans fed up with DStv, the streaming service created a character, Man With A Van. Played by prominent local comedian Jason Goliath, he makes a living faking Netflix installations. Man With A Van visits clients houses, with pointless wiring and over-the-top installation, even carrying an empty box with the words Premium HD—a direct dig at DStv’s premium service.

DStv has always suspected that Netflix is coming for it. First, Netflix sent a helicopter over MultiChoice’s Johannesburg headquarters, flying a banner over their heads, Mawela told local press in May. Then, MultiChoice employees started seeing Netflix billboards going up on roads around Johannesburg.

In all of this Netflix has been almost silent, making moves instead of releasing statements. Getting a formal comment out of them has been near impossible, but their actions have illustrated that they were making a real play for the market.

In a recent article in MyBroadband, Mawela stated that Netflix needs to be regulated by ICASA, and should be BBBEE complaint.

There are no official figures about how many users Netflix already has in South Africa, but in compiling their own 600-page report on their new competitor, MultiChoice estimates Netflix has 300 000 to 400 000 compared with 6.6 million MultiChoice homes. MultiChoice is also blaming Netflix for its loss of more than 100,000 satellite television subscribers in the last financial year, and an additional 40,000 in this cycle.

Apart from not requiring installation, at R165 a month for a premium subscription, Netflix has a price advantage over DStv, which costs R900 a month for a premium subscription. Of course, Netflix requires a reliable internet connection, which is still costly in South Africa. For customers fed up with DStv’s high prices and frequent re-runs , Netflix is already winning the battles for hearts and eyes.

MultiChoice pulls the plug on ANN7

MultiChoice admitted on Wednesday that “mistakes” were made in contractual negotiations with the formerly Gupta-owned 24-news channel ANN7 and that the agreement will be terminated when the deal expires in August 2018. The channel will no longer be carried on DStv after that date.

MultiChoice South Africa CEO Calvo Mawela said at a press conference at the company’s Randburg, Johannesburg head office that it would not be appropriate to renew the ANN7 contract considering “ongoing controversies”. He said MultiChoice will issue a tender to appoint and fund a new, black-owned commercial news channel soon.

“This has been a humbling exercise for MultiChoice,” Mawela said. “…We fully understood the outrage of the public given the endemic corruption in the country. We should have dealt with the concerns around ANN7 more swiftly.”

We fully understood the outrage of the public given the endemic corruption in the country. We should have dealt with the concerns around ANN7 more swiftly
Naspers CEO Bob van Dijk said the allegations regarding ANN7 have “caused me a great deal of concern”.

“Reading the news coverage in November, that is not the kind of messaging you want to see about your company,” he said.

In early December, MultiChoice said that it was aware that its deal with ANN7 had caused “real public concern” and instructed its audit and risk committees to probe the contract.

In a statement at the time, MultiChoice independent nonexecutive director Don Eriksson, who chairs the board committees, said: “The MultiChoice board has read the various media reports alleging that MultiChoice has entered into an irregular relationship for the carriage of the ANN7 channel. The board is aware that the ANN7 channel has caused real public concern because of the allegations of corruption levelled at the former owners of the channel.”

ANN7 was owned by the controversial Gupta family, which has been accused of using its close association with President Jacob Zuma to win state contracts. Zuma and the Guptas have denied the allegations of “state capture”. The Guptas sold the business in 2017 to Mzwanele Manyi, a former government spokesman, in a “vendor-financed” deal — in other words, the Guptas loaned Manyi the money to buy the channel.

Asked by TechCentral if Manyi has been told about the decision to terminate the channel, Mawela said: “We explained the whole situation to him and he has accepted our position and he is considering what we have shared with him.”

‘Comprehensive review’
At Wednesday’s press conference, Mawela read out a statement that said that the board-appointed committee conducted a “thorough and comprehensive review” of the deal with ANN7.

“They met several times, studied all relevant contracts, reviewed five years of related payments information and e-mails, interviewed those involved and did various objective contract and cost comparisons.”

The committee found “procedural shortcomings, but found no evidence of corruption or other illegal activity”.

It found the the commercial terms of the ANN7 contract were within acceptable parameters associated with the establishment and cost of producing a news channel.

“The negotiations with ANN7 began at a time when MultiChoice wanted to add local black voices to reflect more diverse local news coverage on the DStv platform. In addition, annual payments to e.tv (which produces the eNCA news channel) had escalated substantially, heading towards R500m/year,” the statement said.

“The commercial rationale was to assist in the development of the new ANN7 channel by contributing to their costs and allow it a reasonable term of three to five years to develop. Should it fail, MultiChoice would let the agreement lapse at the end of the period, as allowed for in the contract.

“The payments made to ANN7 were not abnormal relative to other local news channels carried on the DStv platform. MultiChoice paid an amount to ANN7 for a start-up 24-hour local news channel that was substantially lower than that paid to e.tv. The terms of the agreement were renegotiated and payments increased when it became apparent that ANN7 needed to improve quality on the channel.”

MultiChoice made an upfront payment to ANN7 of R25m on 15 September 2015, but denied this was abnormal or even unusual. Critics had accused MultiChoice of paying the money to try to influence government policy on set-top box encryption.

When concerns were raised about the owners of ANN7, MultiChoice management should have acted more swiftly to escalate issues to the board for formal consideration and decision
No one will be fired over the ANN7 deal, Mawela and Van Dijk emphasised at the press conference.

“The process of negotiating the ANN7 agreements was a collective MultiChoice management process and not that of an individual,” the company said in the statement.

“No correlation was found between payments made to ANN7 and the MultiChoice lobbying effort,” it added.

However, there had been “procedural shortcomings”, including failure to conduct a due diligence test on ownership of the channel. It said it has never done this for any channel.

“Given the experience with ANN7, the committee is of the view that in future such due diligence should be instituted and be made compulsory for all new start-up channels,” MultiChoice said.

The committee also found that MultiChoice should study international best practice and formalise its lobbying processes. “The new process should be adhered to by all involved to ensure that an acceptable line is not crossed in such activities.”

It added: “When concerns were raised about the owners of ANN7, MultiChoice management should have acted more swiftly to escalate issues to the board for formal consideration and decision.”

Remedial actions
It said it will immediately implement several remedial actions. These include:

  • Ensuring that robust due diligence processes will always be followed for start-up channels;
  • Requiring management to highlight issues of controversy and reputational risk at the quarterly audit and Risk committee meetings; and
  • Formalising MultiChoice’s lobbying process.

In the absence of national guidelines on lobbying and interaction with regulators and government, MultiChoice management will develop guidelines for approval by the board.
MultiChoice will begin the process of sourcing a new commercial news channel that is black owned and that “represents the majority of people in this country”, it said.

The successfully bidder must be owned, managed and run by a black South African company, free from any political or other interference, it said. It must be able to provide independent, non-partisan and critical news coverage of current affairs. And it must take into account South Africa’s history, diversity of cultural backgrounds, language and socioeconomic circumstances in the way it produces content.

Mawela said MultiChoice managed its communication with the public about ANN7 poorly.

While I am pleased that the investigation into the ANN7 contract did not discover any corruption or other illegal activity, the questions we have faced have been sobering
“While I am pleased that the investigation into the ANN7 contract did not discover any corruption or other illegal activity, the questions we have faced have been sobering,” he said. “We made mistakes and must now embark on a path of restoring public trust.”

Democratic Alliance MP Phumzile Van Damme, who lodged a complaint against MultiChoice with communications regulator Icasa over the ANN7 payments — and over a controversial channel-supply agreement between the pay-television operator and the SABC — said Wednesday’s press conference “left many questions unanswered”.

“While we welcome MultiChoice’s efforts in conducting its own review of its carriage agreement with Gupta-owned ANN7, it is difficult to objectively assess the findings of its investigations without sight of the full report,” Van Damme said.

“A press statement, scant on detail, vaguely admitting ‘mistakes were made’, and holding no one accountable for those ‘mistakes’, simply does not cut it,” she said in a statement. “The public needs to know the whole truth about the dealings between MultiChoice, ANN7 and the SABC.

“It is quite clear now that the Icasa probe is more important than ever to ensure that the full facts are put on the table, and those responsible for any wrongdoing are held accountable.”

Van Damme also decried MultiChoice’s decision to pull the plug on ANN7.

“The DA supports a plurality of voices in the media space, and do not believe in shutting down of those we do not agree with,” she said. “This matter was never about whether ANN7 should be on air, but about the exchange of money allegedly to influence government policy.”

By Duncan Mcleod for TechCentral

The dirty underbelly of the Naspers darling

MultiChoice and Naspers are in the crosshairs of public opprobrium for playing tough tackle in their negotiations to protect their market dominance.

“This company is aggressive and entrepreneurial. We often go with our gut,” says a MultiChoice executive to explain revelations of the company’s negotiating tactics, which have landed its parent company Naspers in a mighty pickle.

Naspers is facing three investigations: a litigious class action by a US law firm is exploring the allegations; a parliamentary inquiry on the scale of the Eskom probe is being planned for early 2018; and MultiChoice’s board is engaged in a probe to get to the bottom of the allegations.

MultiChoice and Naspers are in the crosshairs of public opprobrium for playing tough tackle in their negotiations to protect their market dominance, but the company says this is standard lobbying. Here’s a recap of what’s bugging the global Internet and media company:

An investigation by News24 into the #Guptaleaks emails revealed how a company regulatory affairs honcho wrote policy for government that landed up on the email servers of the Gupta family after being mailed through by former communications minister Faith Muthambi.

A set of minutes, which the DA calls secret, but which MultiChoice says never was, alleges that MultiChoice tied an agreement to pay the SABC for digital channels to support for a position that excluded encryption and protected the company’s position.

MultiChoice’s support and contracts with the National Association of Manufacturers in Electronics components in return for their lobbying against encryption.
Analysts say industry incumbents who write policy for government engage in regulatory capture — this is where private interests drive public policy. In mining, a similar trend is apparent. Special interests that are not immediately visible to the public motivate the writing of draft laws and practices such as aggressive inspections and work stoppages.

Standard lobbying

Executives at MultiChoice who spoke to HuffPost SA on condition of anonymity are taken aback at the allegations. The company would not formally respond as lobbying and regulatory affairs are part of the ongoing probe at the company. (See statement below.)

One said that companies often wrote draft policy positions for government as part of the lobbying process. Broadcasting is complex and the South African state’s governance thereof has been sclerotic: there have been five communications ministers in the eight years that President Jacob Zuma’s been in office.

“In lobbying, we are saying what we think the law should say.” As to how the email landed up on a Gupta company server, an executive said: “Faith Muthambi told us she didn’t like those people [the Guptas] at all.”

The executive says only 10% of its recommended policy proposals ended up in the final law, which clarified what the respective functions would be of Telecommunications and Postal Services Minister Siyabonga Cwele and the communications minister after Zuma split the department in two.

“[It’s true], though, that we lobbied everyone and their dog on encryption,” said an executive. This is a separate policy to the one that ended up in the hands of Gupta man Ashu Chawla.

ANC MP and former communications minister Yunus Carrim says Naspers chairperson Koos Bekker “…almost saw himself as an adviser to me [on encryption] as somebody new to the sector. And yet, because of his vested profit and other interests in the pay-tv sector, he obviously couldn’t play any such role.”

A DStv decoder for you, you and you

As a young MP, Carrim sat on parliament’s communications committee. One day, he remembers a furious Frene Ginwala, who was the National Assembly speaker, calling out MPs for taking MultiChoice’s gifts of decoders for MPs. She said it was absurd because “we have to make policy impacting broadcasters”.

Carrim would like to see an end to gifting by MultiChoice and other government-facing companies, which depend on public regulation or licence to operate.

In my experience, there seem to be various forms of ‘regulatory capture’ including perks to MP’s and the preparation of documents for other stakeholders to advance MultiChoice’s interests.
Yunus Carrim
He says the lobbying become more aggressive as certain members of the ANC study group were courted by MultiChoice to take positions against encryption, even though the ANC policy at the time was for conditional access to the set-top boxes that will enable converting old TVs for digital television.

“Of course, business should lobby government as vigorously as they want, but they can’t seek to buy government policy. Lobbying should be within reasonable limits and within a generally accepted framework of ethics,” says Carrim.

DA MP Phumzile van Damme says establishing a code of conduct for public policy lobbyists is essential and will be part of an investigation into state capture in the communications sector in the new year.

MultiChoice responds

We note that your questions deal with the parameters of an acceptable level lobbying. We think it is inappropriate to deal with that at this time, as the MultiChoice Board’s Audit and Risk committees are specifically and currently reviewing these matters. We don’t want to pre-empt or influence the outcome of that process. The audit and risk committees are chaired by an independent non-executive Director. Their report will be submitted to the MultiChoice Board on completion of the review. When this process is concluded, we will communicate the outcome.

We believe that no improper conduct took place in our meeting with the SABC. It was not a clandestine meeting. The meeting was held at the request of the SABC, on their premises and was recorded. Top management and board members of both parties were represented. No kickbacks were paid. It was a negotiation meeting and the final decision on our proposal lay with the SABC Board.

As you know, the Constitutional Court has found in favour of the Minister’s policy. Ultimately, the SABC considered its position and decided to enter into the agreement. Our position on encryption of set-top box for digital migration was well known and had been in the public domain.

We have a long-standing relationship with the SABC dating back to the early 1980s. The parties have bought and sold content from and to each other for many years and will continue to do so.

By Ferial Haffajee, Editor-at-large for HuffPost South Africa

E-commerce and media giant Naspers and its pay-TV arm MultiChoice could now be facing a possible class action suit in the US after a law firm there announced it was starting an investigation on behalf of investors into Naspers.

In the latest fallout in the widening scandal involving allegations of corruption, collusion and undue corporate influence from Naspers’ MultiChoice unit to allegedly influence South Africa’s long-stalled digital migration switch from analogue to digital TV, US law firm Pomerantz has launched a search for investors who want to start a class action lawsuit against Naspers.

Pomerantz said its investigation on behalf of Naspers investors concerns whether Naspers and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices.

In its public statement issued on Tuesday it said: “On December 1, 2017, Naspers reported that its wholly-owned television unit MultiChoice had initiated an investigation into whether improper payments were made to ANN7, a South African news channel owned by the politically-connected Gupta family.

“According to local media, citing leaked emails, MultiChoice substantially increased its annual payment to ANN7 from R50m to R141m over the past two years.

“On this news, Naspers’ American Depositary Receipt price fell $3.05, or 5.58%, to close at $51.60 on December 1, 2017,” Pomerantz said in the statement.

Naspers acknowledged Pomerantz’s statement and told Fin24 on Tuesday that adjustments in global tech markets took place at around the same time Pomerantz highlights.

Naspers re-iterated that it takes the recent media allegations about MultiChoice SA seriously. It however pointed out that MultiChoice SA has many minority shareholders and the responsibility for dealing with the matter lies with the independent MultiChoice SA board.

“The MultiChoice South Africa board has therefore instructed its audit and risk committees to assess whether or not there have been any corporate governance failures at MultiChoice in regard to the ANN7 matter and report back to the board,” Naspers said in an emailed response to questions.

The ecommerce and multimedia giant said it has confidence in the MultiChoice SA board to deal with the matter, following their governance procedures. It said it will verify that the MultiChoice SA board has addressed the matter adequately.

“The MultiChoice Audit & Risk committee has confirmed the action it is taking in response to the allegations in the media. As stated above, once they complete their work following their governance procedures, they will report to the MultiChoice board, and after that has happened the Naspers board will consider whether it is satisfied with the action that the MultiChoice board has taken.”

Source: Thinus Ferreira and Fin24

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