Telkom Media To change Hands

Minority shareholders of Telkom Media are said to be in discussions on whether to exit the struggling pay TV provider, since there could be new strategic direction under the new majority shareholders, which might include Chinese-based Shenzhen Media.

In March, Telkom said it would significantly reduce its 66 percent shareholding in Telkom Media to concentrate on other expansion strategies.

MSG Afrika Group, WDB Investment Holdings and Video Vision were weighing their options on whether to be part of the new-look Telkom Media.

The new majority shareholder could change the group's strategy in a way that might not be in line with their plans. The three own a combined 25 percent in Telkom Media and are its black empowerment shareholders.

A source close to the deal said: "Like every business, if there is a new shareholder they might tweak the business plan. As original founders of Telkom Media, they [minority shareholders] might not agree with those terms of engagement."

Telkom Media said on its website that it would keep its black empowerment shareholding at 40 percent throughout its licence term of 15 years.

Telkom has put a veil of secrecy around the new shareholding for Telkom Media. This week it reiterated that the deal would be finalised before the end of the year.

At least five sources have confirmed that part of Telkom's stake in Telkom Media would be sold to the consortium, which will include the Chinese firm. The transaction was "technically a done deal", as the group had made inquiries with the broadcasting regulator on how to go about filing the new ownership structure.

The Chinese company will probably own 20 percent or less because of a regulatory cap on foreign ownership in media companies. Telkom could end up with about 15 percent.

Shenzhen Media runs radio stations and subscription satellite television channels in China. If it is involved in the Telkom Media deal, it could bring in more than just the capital injection needed to run the venture. The shareholding uncertainties have further dampened Telkom Media's potential to take on MultiChoice.

Telkom Media was once seen as the darling of the market, but the attention has now switched to On Digital Media (ODM), which has since secured funding of more than R1 billion to kick-start its operations.

David Moore, a media analyst at Africa Analysis, said: "What is clear is that the longer this sale takes, the more time MultiChoice - and ODM, once it launches - will have to lock up the market.

"Telkom Media would have faced a tough uphill struggle even if it had launched on time," he said.

The delay has also resulted in a number of staff resignations at Telkom Media. Chris van Zyl, its spokesperson, refused to comment on how many people had left the company since March.