South Africa: Pay-Television Entrants Want 20-Year Licence to Recoup their Investment

Investment

As the first bout of public hearings into broadcasting licence conditions got under way, Telkom Media and the National Association of Broadcasters both requested that new pay-television entrants be given 20-year licences.

During a day of back-and-forth questions, in which the Independent Communications Authority of SA (Icasa) heard oral submissions from stakeholders, one issue arose as an industry requisite for building the newly created subscription television industry -- the need to increase the duration for which a broadcasting licence is valid.

Telkom Media, the first broadcaster to address Icasa's panel, said the licences should be valid for not less than 20 years; if they were for less, the authority should provide good reasons why.

Icasa said in a previous position paper that it would seek a tenure of 12 years for pay-television broadcasters, but the industry indicated yesterday that Icasa had revised this by publishing in its draft conditions paper that licences would need to be renewed every 10 years. Telkom Media chief strategy and operations officer Rikus Matthyser told the Icasa panel that a longer period would help to secure investment because the terms of paying back debts would be more secure. Telkom Media has committed R7,5bn to pay television over the next 10 years.

The break-even period for Telkom Media was likely to be just over 11 years, Matthyser said. Investors would not be attracted to growing the industry "if we commit investors to a time period of 11 years, only to tell them there is a chance that they won't get the licence renewed a year later".

A consultant said on behalf of Telkom Media: "The authority needs to outline its reasons, as well as explain why it went back on its initial commitment (of 12 years)."

Matthyser said it had taken 20 years for MultiChoice to bring 1-million subscribers on to its platform. Telkom Media had estimated it would need 600000 subscribers.

Telkom Media, together with On Digital Media, e.sat and Walking on Water Television, joined industry incumbent MultiChoice in the pay-TV space last month when Icasa awarded new pay-television broadcast licences.

Matthyser said it would be overly optimistic to add four new operators and give them less than 20 years to grow the market when this had not happened in a "monopolistic environment".

Icasa said it had based its decision on the international average for pay-television broadcasting licences of eight years. Telkom Media consultant Libby Lloyd said she believed this to be based on free-to-air commercial broadcasting standards and not pay television. She understood that Malaysia had a 22-year tenure for operators.

(Business Day (Johannesburg), 3 October 2007)