DStv is seeing off TopTV

South Africa’s TopTV has had a tough couple of weeks, having lost its CEO and with news emerging that barely half of its issued 360,000 set-top boxes remain active. Indeed, a report from investment bankers Morgan Stanley on Naspers (which is a major investor in Multichoice/DStv) suggests that TopTV “is unlikely to make major inroads” into South Africa’s pay-TV market.

TopTV, according to sources close to the company, is reassessing its marketing and programming strategy, and is understood to be addressing many of the issues affecting its slow sales penetration.

But DStv is praised by the bank’s report, which says Nasper’s strategy “remains very credible” and is being helped by a host of new value-added services such as VoD, catch-up TV, mobile TV and PVRs. TopTV had planned to launch HDTV channels, and introduce a PVR, but those plans are currently suspended.

DStv, says the bank, “is also focused on attracting middle/lower end paying subscribers through its DStv Lite and Compact packages ($3-12 per month). It is actively rolling out DTT services across Africa as licenses become available ($200 million commitment). Its offerings are typically based on 20 channels for $5-7 per month. We think a reasonable upside case is $250 million of available revenues (assuming 20 per cent penetration to 3 million households) as the cost of set-top-boxes drops from $50 to $20 over time.”

Indeed, these low-cost packages now being introduced have been brought to market as a direct response to TopTV’s core strategy.

Nevertheless, Morgan Stanley suggest that last year’s 22 percent revenue growth will be followed by a 17 percent rise in total revenues this year, and is forecasting annual revenue growth of around 15 per cent over the next three years. By 2015, says the bank, Naspers could be enjoying 5.6 million subscribers in South Africa.

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