London – With the bankruptcy of Kwese TV, there is much less competition in the sub-Saharan African pay-TV market. But during the last moths, there were two developments that seem to be changing soon. Russell Southwood is looking at whether two and two could possibly earn five.
Just before GTV went bankrupt in January 2009, there was a conversation with Canal + about the possibility of buying the company with its operations in Anglophone. It has succeeded and the rest is history. During these years, Canal + had an ‘entente cordiale’ with DStv. It will remain outside the English land markets and DStv outside the Francophone markets.
In those days, Canal + saw itself as an international pay-TV operator with its core business in France. With piracy, it was difficult to develop paid subscribers for its expensive subscriptions in Africa. That has changed and now Canal + is struggling in France, its African operations are one of the more plausible parts of its story.
It made two purchases that changed its position. In 2014, it bought Thema. At the time, Jacques du Puy, CEO of Canal + Overseas, said: “The acquisition of the Theme Group will accelerate our development strategy, especially in Africa, and also provide important knowledge of marketing and publishing ethnic content.” used to add a number of Africa-focused channels.
In 2019, it acquired the production and distribution activities of iROKO. This gave Thema access to a range of different content and distribution assets: the production of 300 films per year and 20 TV series, 3 existing ROK channels on DStv and a ROK channel on Sky in the UK. On top of that, it acquired the talents of Mary Njoku, whose expertise built up the content portfolio and who agreed to continue in both producing and acting capacity.
So two things have happened that seem to be moving Canal +’s Africa strategy forward. In July 2020, Canal + announces that it will launch a pay-TV bouquet in Ethiopia. In October this year, Multichoice announced that Canal +’s stake in the company had risen above the 5% to 6.5% threshold, prompting it to inform the Johannesburg Stock Exchange of the news. According to a report by MyBroadband, it increased its stake to 12% on October 12.
According to the same report, “MultiChoice added that it had submitted the required notice to the Takeover Regulatory Panel. The Takeover Regulatory Panel, which reports to the Minister of Trade and Industry, oversees the country’s takeover regulations”.
While Multichoice is still a formidable operator, it is not the almost inviolable giant it was when Nasper’s arms were wrapped around his shoulder. The sinking Rand also made it less profitable.
Although Amharic is not English, is Ethiopia an English market in all respects, was the old ‘entente cordiale’ then broken down? Canal + and Multichoice are now direct competitors, and whether the content is in English or Amharic is probably not the case. Rumors in the industry indicate Canal +’s willingness to invest heavily in the market to reach the top. Ethiopia is one of Multichoice’s weaker operations and you may ask if Canal + succeeds here, where does it go next?
According to Joanna Darlington, chief transformation officer, Eutelsat, which provides the satellite services: “Our satellite has a specific Ethiopian ray and the Canal + service is aimed at the Ethiopian market”. It will be a mix of international and Ethiopian content. Comments were asked from Canal +, but there was no response.
The small shareholding in Multichoice by the JSE seems provocative. Canal +’s parent, Vivendi, likes trading a lot and multichoice offered itself for sale (before it became known) to, among others, the now bankrupt Kwese TV.
But the fly in the ointment in this particular case is that South African law prohibits foreign investors from owning more than 20% in any South African media company. Vivendi would like to act against opposition, but it’s hard to celebrate.
According to Tech Cabal, Multichoice has already warned investors that it will be allowed to reduce voting rights so that the total voting power of MultiChoice shares presumably owned or held by foreigners in South Africa will not exceed 20% of the total voting power. . “In its integrated annual report for 2020, foreign shareholders owned 35.7% of Multichoice’s shares (excluding voting rights) compared to 48.1% for local shareholders.
In strategic terms, it might mean that two and two are really five. If Canal + makes Ethiopia a success, it could say that the current management of Multichoice is underperforming. If it underperforms in Ethiopia, how many other countries is that true?
Perhaps the minority stake in Multichoice is the equivalent of ‘parking your tanks on their lawn’. As an activist shareholder, he can start arguing from within that the company is underperforming and demonstrating its case by performing better. One important question is whether something up to 19.99% of the voting shares will give it in the board?
Where does Canal + go then? It could be argued that Multichoice needs to concentrate on its core areas and that it will take the rest out of its hands. No change in ownership is required. It could argue that Multichoice’s location in a country with a defective currency undervalues its operations and that it should move to a safer jurisdiction. Harder to see it work, but it depends on how the Rand performs in the next 2-3 years. And another jurisdiction may not have the international limit of 20%.
South Africa’s attitude towards major international stock deals has brought the merger of MTN to light. What if the government were flexible? Economically difficult times may force them to respond flexibly, but that seems unlikely.
Briefly
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