Thomas McLachlan

Thomas McLachlan

While deregulation and increased competition will shatter the monopoly Multichoice has on pay television, space in the new arena may be limited to just a few bigger players, according to portfolio manager at Renaissance Asset Management, Khulekani Dlamini

A flurry of companies including Telkom, SABC, eTV, MTN and Vodacom have applied for subscription broadcasting licences to the Independent Communications Authority of South Africa (Icasa) over the past few months. With an additional 13 smaller companies also having joined the crowd.

However, trends in developed countries showed that while competition would lower prices and increase TV penetration, it would also strengthen the dominant player's hold over the market, according to Dlamini.

While pay TV has been available in South Africa for the past 20 years, Mutichoice has been the only pay TV provider, with 1,25million television sets of the total 7,5million in the country connected to its DStv service.

Dlamini said that with Multichoice being the only player in the market, there would probably only be space for two more providers.

"We believe the demand is available, but struggle to understand how South Africa can buck the trend of similar type and size economies and possibly support more than three pay TV service providers."

As second movers into the market, Dlamini said that competitors would still face the challenge of getting licensed, sourcing capital, sourcing compelling and competitive content and delivering it to households profitably.

Dlamini said the players who were more likely to succeed would be Telkom, Naspers, eTV, SABC, Vodacom, MTN and Sentech.