Competition for the direct-to-home (DTH) market in Africa is warming up with MultiChoice Africa’s pre-eminence in the region likely to come under threat from Gateway Broadcast Services as the latter looks to tap into the demand for affordable pay-TV throughout the region.

Gateway Broadcast Services, a subsidiary of Gateway Telecommunications, has launched a pan-African pay-TV service, GTV, as it aims to challenge MultiChoice, the leading DTH provider with more than 450,000 subscribers in sub-Saharan Africa and South Africa.

GTV was launched In Nairobi, Kenya, June 20 and in Tanzania two days later. Gateway is targeting a market of close to 50 million TV households and hopes to capture about 100,000 subscribers in the first 12 to 18 months of operations.

MultiChoice Africa CEO Eben Greyling discussed the developing market for DTH in the region as well as the impact he sees Gateway having in the region.

Satellite News: How do you view the potential for subscriber growth over the next two years, and which markets have the strongest potential?

Greyling: We think that in the next two years, subscriber growth will be driven by economic development in the various African countries. Around the world, the main driver for growth in the pay-TV market is spearheaded by increases in [gross domestic product] per capita. If you use South Africa as an example, for quite a few years subscriber growth flattened out. Then in the last three [to] four years, as the South African economy started to do well with a corresponding increase in middle-income earners with more disposable income, the pay-TV market started to grow again. In terms of specific countries with strong growth potential, we see most of the markets that we operate in doing well over the last two [to] three and we believe this trend will continue in the future.
 
Satellite News: What kind of impact will Gateway’s service have on MultiChoice?

Greyling: We hope that it will be good news for the market and that consumers will benefit from a variety of services on offer. From our view, this new entrance will hopefully see more investment in local content and contribute to the diversification of the economies and the growth of the local production industries.
MultiChoice’s strategy is to offer premium content and choice. We have a lot of exclusive content that ensures our consumers are getting a world-class product. Still, we offer choice and we have a range of packages available to our customers from our premium top-of-the-range package to our family package, which I believe will remain competitive even after the entry of the new player. However, we are not looking to compete only at the lower end of the market or even to engage in a price war.

Satellite News: What do you see as your potential advantages over Gateway?

Greyling: GTV has some good plans in place, but we don’t see a significant impact on our business because we believe we offer a different service. Our offer is about premium content and variety. Within that, we try to offer different bouquets with different pricing options, but we do not compromise on choice and premium content. … I think it’ll be difficult for GTV to compete with [digital satellite] DStv in terms of the premium sports and movie coverage that we offer. We believe the GTV offering will not compete directly with the DStv premium package and will therefore offer consumers an alternative in terms of a basic pay-TV package.
Their entrance should be good for the market because they offer something different. However, generally when a new player enters the market — not just here but in most parts of the world — the cost of content goes up because operators are all bidding for the same content. That can drive subscriber prices up in order for operators to maintain profit margins. Also, if  operators don’t have the financial backing to operate in a competitive environment, you see them go under, or some market consolidation, as was the case in Europe in the 1990s.

Satellite News: Does MultiChoice have opportunities to deliver its service via platforms other than satellite such as Internet Protocol TV (IPTV)?

Greyling: I think IPTV in Africa as a delivery mechanism is at least a couple of years away. Long-term video over WiMax could work as the technology develops. In the short term, the infrastructure is not there for IPTV to take off in Africa. We keep a close watch on it, especially as it is offers a return path and can do well for certain products if you have good broadband speeds. A [video-on-demand] service can work well on this platform. One day, I can see these services coming to Africa but don’t see it happening in the short term. A lot of other things need to happen before that will take off. However, when it takes off, it will move quickly.

Satellite News: How would you describe the mobile television opportunity for MultiChoice?

Greyling: We will definitely roll out mobile TV in a couple of countries in Africa this year. We will partner with mobile operators for that service. We are a long way down the road in terms of negotiations for these types of partnerships. In the next 12 months, we will probably try to do at least four [to] five countries and then the rest of Africa in the next four to five years. I think it will do very well in Africa. There is not one specific technology which will be the de facto standard. However, we will roll out the DVB-H technology in Africa. There are a lot of challenges, but we think it is a big opportunity for us in Africa and we are well positioned to offer this service to consumers.

Satellite News: Are you planning on bringing higher capacity or high-definition (HD) personal video recorders (PVR) to the market this year?

Greyling: We have got a PVR in Africa which we launched in sub-Saharan Africa in the last year. It is one of those products which is quite expensive, but we can see it growing steadily each month. We have set some steep targets this year in terms of PVR sales. It is a product that sells well in terms of word of mouth. It is a difficult concept to market, so word of mouth is important. It is a very sticky application, so once people subscribe to the PVR services, they are unlikely to churn. We are currently in negotiations as for the development of an HD PVR. We will look to launch it in the second quarter next year and hopefully in time for the Olympics. We will launch HD across the board in Africa.

Satellite News: What are the major content challenges this year?

Greyling: The biggest challenge is the increase in the costs of the content that we acquire. In terms of Africa, we have rolled out a lot of our own African channels, through our sister companies M-Net and SuperSport. We want to continue to make these channels more relevant to the local market, which is difficult if you offer a pan-continental service. We do however believe it is important to grow the African content on our service in order to grow our subscriber base.
In 12 months, we would hope to achieve 20 percent growth in our markets. We always try and grow between 10 percent and 20 percent. We have a few more channels lined up for launch.
At the moment, we are the number one provider of pay-TV in Africa, and I have no reason to think we won’t be the number one provider for the next 10 years. We will do whatever is necessary to be number one and stay number one.