JOHANNESBURG — Cash-strapped independent free-to-air caster e.tv can breathe easier after an Independent Communications Authority of South Africa (Icasa) decision on April 3 approving the conversion into equity of loans made to the caster by investment holding company Venfin.
Icasa agreed on April 4 that Venfin could acquire a 29.5% stake of Sabido Investments, the controlling company of Midi-TV, which is in turn the parent company of e.tv.
However, Icasa stipulated that the majority shares of Midi and Sabido must “continue to be held by black economic empowerment entities.”
There were concerns in the industry that approval of the loan-to-equity conversion would erode black empowerment in the broadcasting sector. Midi-TV won the bidding war for the first independent free-to-air license issued in South Africa five years ago, partly based on its claim to have substantial black empowerment shareholders.
E.tv, despite steadily increasing viewership figures, has been dogged my management infighting and financial problems, exacerbated by the estimated $5m loss on its reported $10m investment in acquiring the exclusive broadcasting rights to the 2002 World Cup soccer event held from May 31 to June 30.
During its application to Icasa for the amendments to Midi’s license conditions, e.tv warned that its future viability would be jeopardized if the changes were not approved, arguing that its input costs had risen because of the fall in the value of the rand relative to the dollar.
E.tv reported in December 2002 that it expected to become cash-positive a year later than expected, only in March 2004, following a poor financial performance for the six months to September 2002 in which it showed a loss of R62m ($6m).
Despite approving the amendments to Midi’s license conditions, Icasa criticized Midi for concluding and implementing a deal with Venfin without first obtaining regulatory approval.
“By concluding a further agreement with Venfin without any prior reference to the authority, Midi has acted in a highly inappropriate manner,” Icasa said. “Granting approval for changes to Midi’s license conditions should not be construed as condoning the company’s behavior which merits censure in strong terms.”