The struggling On Digital Media (ODM) which runs the South African satellite pay-TV service TopTV which is looking to stave off liquidation, has published its Business Rescue Plan together with China's StarTimes media group.
StarTimes is planning a massive overhaul of "failed" TopTV if it gets the go-ahead to funnel massive new millions into the beleaguered loss-making operation.
The Business Rescue Plan names StarTimes' interest in acquiring a stake in TopTV as the company's only and last chance to stave off liquidation. South African broading regulations currently cap foreign ownership on licensed broadcasting entities at 20%.
StarTimes says it wants to "rattle" the pay-TV market "which is currently covered by two other digital television providers in Africa (one other in South Africa" - obviously referring to MultiChoice - by "offering pay-TV services at half their current costs and let ordinary South Africans pay less for good quality digital television".
Star Times wants to help make TopTV a "strong competitor in the pay-television environment currently monopolised by one player," says TopTV's Business Rescue Plan.
The financially distressed ODM is now hoping that China's StarTimes media group will come to its rescue, as TV with Thinus was the first to report on Tuesday.
StarTimes plans to "implement a complete restructuring of TopTV's affairs and business and debt" if it gets the go-ahead to bail out TopTV and become a capital investor and wants to install its own CEO, and a CEO who have been a previous employee of StarTimes.
The Business Rescue Plan warns that job losses may occur and states that should StarTimes not be given the go-ahead, that "a liquidation of the company will be inevitable".
StarTimes has harsh words for the TopTV management in a brutal assessement of the company's problems, saying the TopTV management "implemented an unrealistic operation strategy and business development plan" and that while the "overall management incurred high remuneration, purchasing and operation cost", the pay-TV service suffered due to a lack of "previous experience in, and a deep understanding of, the pay-TV industry and a general lack of business management experience".
StarTimes says its aim is to "give every South African family the opportunity to own digital television" and already run pay-TV packages with bouquets of up to 140 TV channels elsewhere on the African continent.
StarTimes group president ZinXing Ping says StarTimes has the aim of becoming "Africa's most influential digital TV operator".
"There are about 11 million households in South Africa with TV sets. About 4 million are subscribers to pay-TV. There exists a tremendous potential to develop the pay-TV base in South Africa".
StarTimes says it has identified "operational deficiencies" in TopTV which includes "low quality programming, high costs, inappropriate packaging and a high churn rate". It also says TopTV has a small subscriber base (which impacts content cost, purchase cost, subscriber development cost and market competitiveness).
StarTimes which already has over 7 million pay-TV subscribers in China already operates pay-TV services in 13 African countries with 23 000 employees and 2,3 million African pay-TV subscribers across the continent.
StarTimes is now seen as the lone bailout hope and the strategic business partner which will now be the last possible lifeline for the Woodmead-based pay-TV operation after TopTV's biggest South African investment groups balked at pouring more cash into the loss-making business.
The troubled ODM which started its commercial pay-TV service three years ago in May 2010 is looking to stave off liquidation of TopTV which burned through R25 million per month above what was budgeted until the end of October 2012 when ODM filed for business protection because the pay-TV operator was unable to reverse its losses.
China's StarTimes and its group president ZinXing Ping, operational in African countries such as Nigeria (where it passed 1 million subscribers last year), Tanzania, Kenya, Rwanda, Uganda, Guinea, the Central African Republic (CAR) and Burundi already has registered local companies in 16 African countries and is willing to inject new capital into TopTV.
This will give China and StarTimes a crucial foothold in South Africa's pay-TV market - the most advanced on the African continent which is dominated by MultiChoice where TV viewers are able to subscribe to DStv as a satellite pay-TV service and M-Net as a terrestrial subscription television service.
StarTimes says that as a digital technology provider it already owns a number of digital television invention patents and software copyrights. StarTimes has set-top box (STB) decoders which support standard definition (SD) and high definition (HD) television.
StarTimes says "the lack of scale and experience of management resulted in low quality and highly priced programmes" at TopTV.
StarTimes says TopTV "failed to observe that television is an entertaining terminal enjoyed by the whole family" in terms of how it designed packages, and that this led to TopTV "active user rate being extremely low". Star Times says TopTV's "subscriber base stagnated".
"The subscriber either has to buy all the packages (in which case TopTV does not have any advantage over DStv in terms of price), or buys the basic package which offers limited programming. Because the other packages cannot be sold alone, TopTV subscribers can either not afford the whole bouquet or they feel the programmes on the limited, low-cosst package is not an attractive option."
"TopTV does not have any differentiation or competitive advantage," says StarTimes. "DStv is a very strong and powerful pay-TV operator in the South African - and even in the Pan-African - market. Compared with DStv, TopTV does not have an innovative business model or differentiated products and services and has no cost advantage due to its small size in the market."
StarTimes says one of the operational weaknesses at TopTV "has been the high cost paid by the company for programme content" and that StarTimes has already started discussions with content providers at negotiating new contractual terms for the supply of programming.
StarTimes says that TopTV's "goodwill" in the market place has been eroded, but that StarTimes its "highly respected and influence and reputation" can help to restore TopTV credibility and restore its operations.
StarTimes says that with funneling money into TopTV, it wants to "rattle" the South African pay-TV market and offering the existing service at half the current cost.
ALSO READ: Brutal assessement of TopTV and its pay-TV failings by StarTimes which is looking to bail out the South African pay-TV service.
ALSO READ: China's StarTimes hoping to rescue TopTV's business.
