Preparations by Telkom Media to launch a pay-TV service and news
channel have come to a grinding halt as its parent company scrambles to
find new financial backers, write Lloyd Gedye and Pearlie Joubert in the Mail & Guardian.

Since Telkom's announcement that it would dramatically scale back investment in the subsidiary there has been a pall of uncertainty over its future, with staff fretting over their jobs, expensive equipment sitting idle in warehouses and scepticism from potential investors.

Telkom Media was reluctant to comment, but company insiders told the Mail & Guardian this week that the broadcast company had only a 50/50 chance of surviving.

"Telkom television is not going to happen, at least not in the foreseeable future," said one staffer who didn't want to be named. "They're in big trouble."

The staffer said Telkom Media had already spent more than R700-million buying three buildings, filling two Durban warehouses with equipment, building studios and securing access to satellites.

"They need a partner to come up with 30% of the total budget, which amounts to more than R2,5-billion," said the source. "This investment will show no returns for six to seven years."

Telkom's chief executive Reuben September sent the broadcaster into a flat spin in March when he announced it was planning to reduce its funding of Telkom Media from R7,5-billion to R5,3-billion.

Telkom spokesperson Nabintu Petsana said this week that there were too many competing initiatives that needed funding and had a shorter payback period than Telkom Media, so the fixed-line operator decided to reduce its shareholding in the subsidiary.

"Of course the news [of Telkom's planned disinvestment] and the way it was presented could have been done better," said another insider. "The consequence has been quite devastating. Things have come to a standstill to a large extent … building is still happening on site and they are still busy with the preparatory work, but they're not hiring and there's no chance they will launch this year."

Numerous other sources close to the broadcaster, who declined to be named, confirmed that Telkom Media had already entered into licensing agreements and contracts with a number of large overseas content providers.

However, they said, these contracts are now on hold and Telkom Media could lose out on some of its planned content.

"They have entered into a number of content agreements but no money has changed hands," said one person familiar with the negotiations. "The delays have angered a number of content providers."

Telkom Media's existing staff, numbering between 150 and 200 throughout the company, are described by colleagues as "very despondent" and many fear they will be offered severance packages if the company fails.

Sources close to Telkom Media confirmed that chairperson Connie Molusi was desperately trying to put together a consortium of people to back the broadcast company.

Tokyo Sexwale, who has been buying media assets aggressively, was a prime target for the broadcaster. The board was using a "big charm offensive" to lure him, but it appears to have failed.

Click here t o read the full report, posted on M&G Online.