Why Telkom, MTN, Vodacom and Cell C could determine the future of Netflix and Showmax in South Africa

Telkom and e-TV made headlines this weekend after it emerged that Telkom had approached the broadcaster a number of times with an offer to purchase.

While interested buyers were rejected as a “matter of principle”, the reports noted that Telkom was not the only interested buyer, and that Hosken Consolidated Investments (e-TV’s parent company) was also constantly in talks with mobile operators like Vodacom and MTN about partnership opportunities.

Telkom declined to comment on the acquisition reports, but noted that “many telecoms companies had identified content as a strong driver for high-speed broadband adoption”.

While e-TV has been a notable target for these telecoms companies, all OTT TV and video will be under the spotlight within the next five years, according to a new report by Digital TV research.

Over-the-top content (“OTT”) is a term used in broadcasting and technology business reporting to refer to audio, video, and other media transmitted via the Internet as a standalone product.

It typically precludes services that form part of an operator of multiple cable or direct-broadcast satellite television systems but will include video rental services, video-on-demand and subscription video-on-demand services.

Big business

According to the report, Sub-Saharan Africa OTT TV and video will still be considered a very immature sector by 2022, with movie and TV episode revenues reaching $640 million (R8.2 billion) for 35 countries.

However, this total is up by a multiple of 12 on 2016’s $52 million, according to the Sub-Saharan Africa OTT TV & Video Forecasts report.

South Africa will account for 40% of the region’s revenues by 2022, with Nigeria bringing in a further 21%, it said.

“It is very important to stress the power that mobile operators have over the future of Sub-Saharan African OTT TV and video,” said Simon Murray, Principal Analyst at Digital TV Research.

“Although the total will triple from 2016, we only expect 13 million fixed broadband households by 2022. Fixed broadband is clearly not big enough to sustain a viable OTT sector. However, there will be 486 million smartphone users by 2022.”

“The mobile operators know that they are in a powerful position. Not only can they give OTT players access to their extensive subscriber pools, but they can also conduct the billing (thus foregoing the need for SVOD platforms to insist on credit card payments).

“Most importantly, many mobile operators currently charge high data prices for OTT access – which can add considerable costs to subscribers. However, a distribution deal with a mobile operator can substantially cut these costs.”

Read: How much money MultiChoice makes per DStv subscriber

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Why Telkom, MTN, Vodacom and Cell C could determine the future of Netflix and Showmax in South Africa