Telkom fails to find a new investor for Telkom Media and closes company

Investment

The process to sell Telkom Media has failed and its main shareholder will push for the liquidation of the business, it was announced this morning. Telkom, which holds a 66% stake in the pay-TV business, confirmed in a JSE statement that “an extensive process to identify potential buyers of Telkom's interest in Telkom Media has proved unsuccessful”.

The telecoms operator added it intends calling the “necessary shareholder meetings to seek the approval for the winding up of Telkom Media”. This is expected to happen within the next 30 days, but industry speculation has it that a meeting may have already been scheduled for next week.

The minority shareholders in Telkom Media are Videovision Entertainment (15%), MSG Africa Media and WDB Investment Holdings (5%), a staff incentive trust (4%), as well as an unnamed black empowerment shareholder (5%).

In March last year, Telkom announced its intention to significantly reduce its shareholding in the pay-TV service provider and has, since then, reduced its operational expenses and commitments to a minimum.

Telkom never really revealed its reasons for wanting to exit Telkom Media, bar an announcement by Telkom CEO Reuben September last year, who indicated the pay-back period for the telco's investment was simply too long. By that stage, Telkom had already invested R700 million in the business and September stated Telkom would reduce its total planned investment of R7.5 billion to R5.3 billion.

Last week, Telkom Media spokesperson Chris van Zyl said he could not comment on Telkom's proposed liquidation announcement, as it was a shareholder matter. He also declined to comment on the future of the company's employees, or on reasons for Telkom's failure to secure an investor.

However, company sources claim that, despite a number of parties showing interest in Telkom Media, it is likely their inability to provide guarantees could have scuppered a potential deal. At one stage, potential suitors were rumoured to be China's Shenzen Media and local business magnate Tokyo Sexwale.

An insider questions why Telkom would make such an abrupt turnaround and states Telkom Media is also in the dark regarding the extent of the telco's reasoning for its sudden divestment decision.

“This is very unusual. Telkom Media's business plan - conceived back in 2005 - received Telkom board-level approval in August 2006. Then a new board and a new CEO come in and suddenly there is this turnaround.

“It's a very strange situation. The business plan was very viable and had been re-evaluated a number of times. It could be that some elements within Telkom could have been unhappy with some aspects of the plan, but this was never communicated to Telkom Media,” notes the insider.

In September 2007, Telkom Media was granted a commercial broadcasting licence, allowing it to provide satellite pay-TV services and IPTV in SA. The company claimed it had been ready to start operating since November 2008, when it announced details of technology purchases and infrastructure.

However, a former senior manager of Telkom Media disputes this, saying all funding and work stopped in March 2008. He also alleges no technology platforms were purchased, due to certain members of the executive committee “wanting to make some money on the side through these deals”.

ItWeb