Tribunal says Canal+ acquisition of MultiChoice presents minimal competition concerns
Image: File
Tawanda Karombo
The Competition Competition said on Thursday that the planned acquisition of MultiChoice Group (MCG) by the French television powerhouse Canal+ has revealed minimal overlaps between the two entities, given their respective market sizes.
However, the proposed merger will necessitate a fundamental restructuring to separate the licensed broadcasting unit, which will transition into a standalone entity named LicenseCo.
MultiChoice has been struggling to retain subscribers for its pay television platform, DStv, ven as it seeks to expand its digital footprint through investments in online streaming service Showmax.
The acquisition by Canal+ is positioned as a revitalising force for MultiChoice, pending final approvals from regulatory bodies and competition authorities.
The Tribunal on Thursday heard from the Competition Commission that there were overlaps between MultiChoice and Canal+. These overlaps include included horizontal and vertical considerations.
During the proceedings at the Tribunal, both companies have horizontal overlaps as they both supply video content for broadcasting purposes.
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It was the Competition Commission's findings that MultiChoice acquires and aggregate broadcasting content across sports and movies under its subsidiaries M-Net and SuperSport while Canal+ also has similar offerings although at a small scale.
'Vertically, Canal+ currently provides content to LicenseCo, which is part of MCG while its affiliated entity, Havas Media, purchases advertising space from MCG's sales house, Digital Media Sales (DMS),' said Ndivhuwo Moleya, senior analyst for mergers and acquisitions at the Competition Commission.
The Commission said these links presented potential vertical overlaps in content and advertising supply chains, but it deemed them as insignificant.
'Looking at the number of channels that Canal+ supplies, in particular on the DStv platform, we understand it's not more than three. The upshot of that is that from a horizontal perspective, (the overlap) is very small because of the smallness of the content that Canal+ provides downstream,' said Moleya.
According to the Competition Commission, the broader content market includes numerous global suppliers, indicating low risk of anti-competitive effects.
Moreover, overlaps within the upstream advertising market, regarding the the sale of advertising slots on broadcast platforms and the downstream advertising market involving agencies such as Havas Media that purchase advertising on behalf of clients, were also determined to be less significant.
In arriving at the determination, regulators adopted a 'worst-case scenario' to ensure all potential competition concerns were examined.
The merger between MCG and Canal+ will be subject to a resutructuring exercise to ring-fence MultiChoice's licensed broadcasting entity, MultiChoice (Pty) Ltd. This unit will be hived off into a standalone company, LicenseCo, in line with local regulatory requirements.
After settlement of the merger, the combined group will have no interest or control in LicenseCo. However, details of the this carve-out structure for LicenseCo remain confidential.
LicenceCo will be majority-owned by previously disadvantaged and black economic empowerment companies, with MCG holding a 49% interest.
Canal+ has, however, previously said that it was still engaging with Phuthuma Nathi, which has been earmarked to hold a 27% interest in LicenceCo, although the board has already given its support for the transaction.
Black-owned and managed companies, Identity Partners Itai Consortium owned by Sipho Maseko And Sonja De Bruyn, and Afrifund Consortium have also been roped into LicenceCo, bringing 'highly experienced leaders' with 'great commercial and industry' knowledge.
'This seems a clever way to get around foreign ownership rules assuming they've had at least informal approval from Independent Communications Authority of SA (or discussions) and now deal can go ahead,' market analyst Simon Brown previously told Business Report.
The CEO of Canal+, Maxime Saada, said earlier this year that the acquisition of MultiChoice was an 'opportunity to create a unique global media company, with a strong presence across Africa with the scale, expertise, and creativity to compete and partner with the largest players' within the media and entertainment sectors.
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