MultiChoice’s JSE listing vexes communications regulator

Icasa says the company jumped the gun with its JSE debut as its broadcasting licence was awarded to Naspers, not MultiChoice.
Big news day for the standalone MultiChoice Group. Image: Moneyweb

Trading as a newly listed entity on the JSE for barely six hours on Wednesday, MultiChoice had already angered communications regulator, the Independent Communications Authority of South Africa (Icasa).

After MultiChoice unbundled from parent company Naspers, Icasa said it was concerned about the company forging ahead with its JSE listing despite facing an ongoing complaint about a potential breach of its broadcasting service licence.

Prior to the listing, MultiChoice was a subsidiary of Naspers and had been its pay-TV arm for the past 25 years.

MultiChoice was hauled before Icasa’s Complaints and Compliance Committee on February 18 after non-profit organisation Khulisa Social Solutions complained that the company’s JSE listing would breach the Electronic Communications Act.

In a statement on Wednesday afternoon, Icasa said it was “concerned” that MultiChoice went ahead with its listing, which gave it a market valuation of R45 billion, while its committee was yet to make a final decision on Khulisa’s complaint.

Complaint

Khulisa said in its complaint, which Moneyweb has seen, that MultiChoice’s listing on the JSE constitutes a transfer of its individual broadcasting service licence from Naspers to the management and board of MultiChoice. In other words, the control of the licence now rests with MultiChoice.

The transfer of licence, which was sparked by Naspers’s decision to unbundle MultiChoice into a standalone listed entity, occurred without either company obtaining permission from Icasa under the Electronic Communications Act, Khulisa said in its complaint.

Section 13(1) of the Electronic Communications Act 36 of 2005 stipulates that a licence may not be transferred without the prior written permission of Icasa.

“More significantly,” Khulisa said, “the listed vehicle [MultiChoice] will be an independent standalone company no longer accountable in any manner to Naspers. Instead of Naspers being the parent company, MultiChoice Group, the newly listed company, will be the controlling company. This is a change of control.”

Naspers ‘reneged’

Khulisa argues that Naspers reneged on its promise to seek approval and inform regulatory authorities about the transfer of control when it announced its decision to unbundle MultiChoice.

“Yet four months later in its pre-listing statement, there is not a mention of regulatory submission or approval by MultiChoice Group.”

If MultiChoice is found to have breached the act by not informing Icasa about the transfer of its licence, it could face sanctions that might include closer scrutiny of its broadcasting licence.

Icasa would ask MultiChoice to motivate if the company is fit enough to control its licence. The regulator might also impose more onerous conditions on its licence that prohibit MultiChoice from entering into anticompetitive behaviour.

MultiChoice spokesperson Joe Heshu told Moneyweb that the company is satisfied that it has complied with all regulatory requirements for its JSE listing. “We have engaged constructively with Icasa’s Complaints and Compliance Committee to resolve the matter,” he said.

In its answering affidavit to Khulisa’s complaint, the company said the licenced entity is MultiChoice and that MultiChoice will continue to be the holder of the broadcasting licence. It further said there will “not be any transfer of the licence” caused by the unbundling of MultiChoice.

MultiChoice also argued that it had not contravened its licence conditions in the past, and that Icasa’s committee had no jurisdiction over future events as the company’s listing had, at that time, not yet materialised.

MultiChoice Group

Read: MultiChoice’s market cap tops R42bn on JSE debut

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The fact that Tracker funds are compelled to buy shares due to this listing market value supported by Naspers forcing it into the JSE top 40 smells rotten. In my opinion this is an artificially inflated value and will hopefully be investigated. South African business community and the JSE has to be more responsible if we are to avoid future Steinhoff African Bank etc scenarios. Nothing is too big to fail – we’ve learnt that lesson already.

No, tracker funds did not buy MCG at listing. If they held Naspers, they received MCG at part of the unbundling as did any other shareholder of Naspers.

Aww! What’s in it for the regulators now?
Poor chaps aren’t getting the greasy palms they expected. Shame.

After all the dirty laundry that came out at the State Capture Enquiry, one has to be suspicious about any interaction between business and government out of principle. The approach should be suspicious until proven aboveboard. In this case:

1. Why would a not-for-profit organisation focussed on community development take an interest in the broadcast license of a media company just before that company lists on the stock exchange?

2. What community interest is served by that? if any.

3. Is it an ambush attempt to get a stake in the media company or some other financial reward?

4. Is the not-for-profit organisation being used as a stalking horse.

End of comments.

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