Zambia’s public DTT signal distributor in trouble – market seems too small to make the Government’s loan payments

30 August 2019

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DTT was always going to be hard to finance in Africa’s smaller broadcast market’s. Zambia’s public DTT signal distributor TopStar – a joint venture between Government broadcaster and China’s StarTimes – seems to be in financial trouble only two years after it started.

After a shaky start, the Zambian digital TV market has become extremely competitive. In the free-to-air space, there are three main channels: the Government’s ZNBC (which is the joint partner for the troubled TopStar), Muvi TV (which operates two channels and is also a signal distributor) and Prime TV (which has been critical of the Government which has tried to close it down). In the pay TV space, there is DStv (which also offers its low-cost GOtv bundles), Zuku (from Wananchi) and StarTimes (the partner in TopStar, which offers both satellite and DTT options). There is also Kwese TV’s free-to-air product that has survived after the closure of its pay TV operation.

According to ZICTA’s 2018 Household ICT survey, 37% of households have a TV, which is about 5.7 million people (based on 5 people per household), out of an estimated 15.4 million people from ZICTA’s estimate. TopStar claims to have 700,000 subscribers across the country.

Zambia’s broadcast regulator is the Independent Broadcasting Authority but DTT signal distribution licenses are managed by the telecoms regulator ZICTA. There are two types of signal distributor license: public and private. Both are required to provide nationwide coverage and “service to Content Service Providers (licensees) on a competitive and non-discriminatory basis”. TopStar Communications is the only mandated public signal distributor operating in Zambia.

TopStar’s commercial dilemma is that there are very few potential customers for its platform. Pay TV provider StarTimes offers three bouquets: Classic, Basic and Nova. The biggest of these bouquets – Nova – provides 32 channels. Of these, only four are local: ZNBC, CBC, Hope Channel and Camnet. The latter two are religious channels.

So unlike in say Kenya and Tanzania there has not been a flourishing of local channels who might pay for distribution separately to the StarTimes bouquet. TopStar really only has two customers: the Government’s ZNBC and StarTimes. Advertising in the market is much smaller in size and what advertising there is does not appear to be able to underwrite more channels.

So this places TopStar in a difficult position commercially. The Zambian Government borrowed US$237 million from China’s Exim Bank for the joint venture and any failure to generate revenues puts repayments for that 25-year loan in question. The US$273 million loan is not just for DTT signal distribution: it is also paying for new ZNBC studios as well as 73 transmission sites. TopStar says that 65 of these sites are operational and the balance will be completed by the end of October. TopStar is 40% owned by the Government broadcaster and 60% owned by StarTimes.

However, it is not been made public how these shareholdings relate to the Government loan. But an anonymous source recently told ITWeb Africa that the company is battling to roll out its network of transmitters across Zambia, despite previous promises of national coverage by December 2018. Work on further roll-out seems to have ground to a standstill. On the record, TopStar's Vice President Cliff Sichone said that the company is "faring well" against increasing competition but he acknowledged that the generation of revenue remains critical. But it remains unclear how it will make those loan repayments when there are so few channels requiring distribution in the market.

The Chinese management of the joint venture have been surprisingly blunt in the their assessment in a report in The Mast. TopStar CEO Alex Jian said Chinese and Zambians ought to work as a team to discover the right way of increasing revenue for the company to pay back the loan:“When every business shows obvious interest and the revenue is high enough, we will definitely hand over the company to [a] local team….” said Jian.

“You may be aware that there were some complaints in the media that the Chinese team is treating [Zambian] staff in a wrong way. To be honest, the conflicts between management and employees are always there since the universe began. The reason is simply; there are some staff who contribute value to the company while some of them are wasting time during the work.”

Although ZNBC’s Director General Richard Mwanza said recently on his own channel that there is no taxpayer’s money involved, this is not strictly speaking completely accurate. The Government will pay interest on this loan and will be liable for its repayment if the TopStar joint venture fails to find its commercial footing as currently seems likely.

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