Naspers unfazed by TV rivals

Johannesburg - Media giant Naspers posted results for the year to end-March 2009 on Tuesday, showing a 30% revenue growth to R27bn. Core headline earnings increased by 9% to R4bn.

The Naspers board recommended a 15% dividend increase to 207c per share.

The group's leading profit generator is Multichoice, which has enjoyed a market devoid of competition in its African operations since the demise of GTV.

In South Africa four licensed competitors are expected to enter the market soon, but Naspers CEO Koos Bekker doubts the competition will amount to much.

"The competition is unlikely to mean much. Multichoice has always competed against a variety of products," he said.

"Like movies - you can see a movie on cinema release and pay more to see it first, or you can wait to rent or buy the DVD. Alternatively, you could pay a little bit to see it on pay-TV or wait to see it on free TV.

"So the way you see a movie has always been competitive and Multichoice has had to price itself in an attractive way. I don't see another pay-TV operator shifting that consumer choice very much."

Bekker said Multichoice has benefited from the recession, in which families have invested in stay-at-home activities.

"Pay-TV is typically a middle class activity. Our ideal family is the married couple with two kids, so they are a bit more tied to the home.

"Our best market is not either the very wealthy who can afford to travel a lot, or younger people that tend to drift around. It's typically that nuclear middle class family and what has happened recently is that our big growth is in the black market, which is an interesting comment on our society."

Pay television represents 56% of Naspers' R26.7bn revenue, while internet businesses constitute 14%. Bekker said the lines are beginning to blur between these sectors, however.

"I would be very surprised if, in 10 years from now, there is a distinct pay-TV sector. It's all going to move onto the internet. There will still be satellite feeds, but essentially we will be competing with internet companies. The whole electronic media world is becoming one big cloud and we'll have to compete with that."

Bekker hinted at more investments to come, with 11% of the group's profits coming from new acquisitions during the past year.

"We have quite a rigorous process of assessing investments, so last year we looked at almost 200 proposals. Then we put it through the mill and we winnow it down and eventually we closed about 20 deals," he said.

"The same will happen this year. So we get proposals for small add-on deals to strengthen existing business, to standalone proposals. We assess all of them, but the problem is you can't forecast it because you don't know what will come your way."

Coronation Fund Manager's Godwill Chahwahwa said it is difficult to forecast what competition in the pay television market will mean for Naspers, but is happy that the franchise value of Multichoice will remain strong.

"Four licences were issued [by the Independent Communications Authority of South Africa]. The expectation is that there will be competition coming down the track. Naspers makes the point in its results that it expects competition in South Africa from the fourth quarter of this year," he said.

"Telkom Media was acquired by Shenzhen Media recently and the latter has not yet revealed what its plans and strategies are," Chahwahwa said.

"It's unclear to what extent Telkom Media will be a factor, but you do have other players that did get licensed. One of these is On Digital Media that has indicated that it will launch in the near term. One would expect at least one of the licensed players to be operational in a year's time."

- Fin24.com

Fin24.com is part of FinMedia24, a Naspers subsidiary.