BEE partners hope Chinese make StarSat profitable

Former Robben Island political prisoners and influential executives are among a string of new black shareholders set to benefit from the revival of the company previously known as TopTV, a rival to Naspers's high-flying MultiChoice.

TopTV, which is owned by On Digital Media (ODM) and now known as StarSat, was plunged into business rescue two years ago. TopTV launched in 2010 with R1-billion in capital and a much-hyped plan to woo viewers away from MultiChoice's DStv, but it fell far short of expectations. It is estimated to have 85000 subscribers - a fraction of DStv's 5million.

But the rebranded StarSat now hopes to climb out of business rescue within months and begin trading normally again.

The final step in the process is transferring StarSat's network licence from ODM to StarTimes Media, the company's new Chinese investor. The application is already with the regulator, the Independent Communications Authority of SA (Icasa).

Eddie Mbalo, the former ODM interim CEO and now a consultant and shareholder, said Icasa was expected to respond in 30 days. But Icasa spokesman Paseka Maleka said the regulator "doesn't have a strict timeline".

Without the transfer of this licence, the deal with StarTimes to recapitalise ODM will collapse, according to Mbalo.

Some new black economic empowerment (BEE) shareholders will be hoping it gets the green light.

Lulamile Xate, a shareholder in Digital Landmark, which is ODM's main new BEE partner with a 28.8% stake, said the parties believed they would need to raise R2-billion to recapitalise the firm over the next three years. "We'll need to raise that using our own asset base," he said.

Xate's company, Ainsdaal, owns nearly two-thirds of Digital Landmark, alongside Cadiz Holdings and the Makana Trust, which was set up for former Robben Island political prisoners and their dependants.

Xate is a major shareholder in Ainsdaal, while Cadiz Holdings owns 28.17% and businessmen George Tatham and Arthur Shiplana have 2% each.

Women's group Nathola Investments holds 32% in Ainsdaal, according to a document seen by Business Times. The group benefits only nine women compared with a broader base of women who were set to benefit from ODM through the Cosatu-linked Red Gold Investments, which was booted out as a BEE partner in ODM last year.

Another new BEE partner is Diduscan, which holds 9.6 %. It comprises the Mbalo Investment Trust of Mbalo and the Woodland Commercial Trust owned by Simon Woodland, ODM's former interim chief financial officer.

But there has been an unseemly spat over cronyism among the BEE shareholders.

A former BEE partner, First National Media Investment Holdings, claims the state-owned Industrial Development Corporation (IDC), which has a 22% stake in the pay-TV network, gave shares "cheaply" to politically connected individuals.

First National Media said this trivialised the sacrifices made by ODM's founders - some of whom even mortgaged their homes to start the firm in 2010. The IDC denied the allegation.

Nevertheless, First National Media and the IDC are fighting in court over 2.8million BEE shares. The IDC had said it was claiming the shares to settle loans to the former BEE shareholders, under an agreement.

ODM's new BEE partners, meanwhile, deny that the IDC gave them the shares or that they had benefited unfairly.

Xate said the partners had bought "empty shares" for not more than R10000. "The shares are worth nothing at this point in time because (business rescue) is not finalised."

Mbalo, who was previously tasked with turning ODM around, agreed that the shares held little value .

Tholakele Dlamini, a major shareholder in Nathola but who said she was invested through a consortium, AnySong, denied that shares were sold for R1, as claimed by First National Media shareholder Vino Govender. "It's worth more than R1. It's a going concern. As much as we bought it on its way to the sheriff, it wasn't for mahala (nothing)."

ODM's other shareholders are the National Empowerment Fund with 19% (up from 10% previously), the IDC with 22% (up from 11.3% previously) and StarTimes with 20%. The 1% stake held by Mergan Moodley, who challenged the business rescue plan, was diluted to 0.123% after StarTimes, which will take 65% of the company's economic profits, took a stake.