Like a scene from a Halloween horror film, digital TV operator TopTV says it will adopt the provisions of business rescue as per the new Companies Act (under Section 129) in order to stay afloat financially while it searches for an equity partner.
TopTV said that the team that took charge of TopTV in February had made great strides in moving the business forward, including the launch of a series of innovative products like prepaid subscriptions, first-run exclusive series and its own local productions.
“Since the start of the turnaround programme, the bottom line has improved and some limited funding has been sourced and injected into the business. This is the strongest position the company has been in since inception,” stated TopTV interim CEO, Eddie Mbalo in a statement issued late Wednesday (31 October).
“However, the business has always required a significant cash injection to recapitalise it in order to complete the turnaround and take the business to the next level of competitiveness.”
“South African companies in this space have generally taken between three and four years to make a profit and with far less regulatory and statutory restrictions imposed on them,” he said.
According to the satellite TV company, the best source of such a cash injection would be a current industry player, to assist with other required strategic resources that would take time for TopTV to accumulate.
However, the group said that due to the competitive landscape locally, and the legislative requirements that allow a foreign entity only a 20% share in ownership, the process of finding an appropriate partner has proved challenging for the start-up business.
Rival digital TV operator, MultiChoice in September recorded strong growth for the financial year ending March 2012.
Total group revenue increased by 16% to R20.5 billion, while its net profit increased by 24% to R4.2 billion mainly due to organic growth.
During the year under review, MultiChoice South Africa’s subscriber base grew by 492,000 households, with the overall base at four million households as at end March 2012.
TopTV said that, as part of the turnaround process and good corporate governance, the board of directors of On Digital Media, regularly assesses whether the company is in a position to meet its current obligations and those due within the next six months.
Based on this ongoing assessment, and precipitated by the difficulty in finding an appropriate partner, “the board has prudently opted to adopt the provisions of business rescue as per the new Companies Act (under Section 129)”.
This, it said, would provide a “protective bubble” around the company and buy it some time to complete the search for a strategic equity partner.
TopTV said it will continue to function as normal, and will continue with its plans to launch a number of initiatives in the lead-up to the festive season.
“It is still very much business as usual at TopTV. While we are taking precautionary measures and being prudent with our current cash reserves, the board has taken this decision to ensure the long-term sustainability and growth of the company,” said Mbalo.
“TopTV has already made its mark in this space by providing healthy competition within the industry and giving consumers an alternative pay-TV experience.”
“We further believe that this decision will cement our commitment to transparent business practices while we continue our battle on what we hope will become a more transformed landscape and a level playing field.”
TopTV said it is currently in the throes of launching three original, locally-produced programmes to boost the content on its flagship channel, Top One.
“Whilst access to mainstream sports content remains uncompetitive, TopTV is adding a new dedicated sports action channel, the first of its kind in Africa, to its platform in the first week of November,” it said.
“The board, management and staff at TopTV are committed to the company, and we are determined to work together as a team to make it a successful business,” Mbalo concluded.