Author(s): Tony Worthington
DirecTV, DishTV, Sky, MultiChoice: four leading providers of direct-to-home (DTH) services that have had an instrumental role in establishing the industry in their respective key markets.
MultiChoice currently accounts for over half of all DTH subscribers in sub-Saharan Africa with 12 million customers. StarSat has about 4 million and Vivendi-owned Canal+ has just over 2 million subscribers on the continent. Despite some interesting announcements from StarSat, neither small nor national operators appear to have the innovation and product range needed to challenge MultiChoice and accelerate the growth of the DTH market in Africa.
As a whole Africa has 1.38 billion people, 1.29 billion mobile connections and just 19 million DTH subscribers. In the US, the top six DTH providers have about 80 million customers against a population of 320 million people. There's obviously huge potential for growth in Africa. In theory, the continent should be ideal for DTH rather than other access methods, such as cable. But given its many vast, open countries, telecom and entertainment operators have historically struggled to offer connectivity to this potential captive market.
All that has now changed. Not only are 4G networks and their associated access speeds widespread across the continent, highly successful broadband operators such as Liquid Telecom and Internet Solutions are building fibre networks in many African countries.
Since its launch in 1986 in South Africa as part of M-Net, MultiChoice has grown steadily over the years to be operational in almost fifty countries presently. The company is owned by the diversified media group Naspers, which has many assets in Africa and Asia.
MultiChoice now finds itself at a pivotal point. It's faced with two main obstacles in sub-Saharan Africa: shifting consumer tastes and changing access technologies. And a new entrant, Kwese, is uniquely positioned to be at the forefront of these challenges. It could quickly become MultiChoice's main rival.
Kwese is part of Econet Media, a media division in the highly successful Econet Global Group, owned and directed by the widely admired entrepreneur Strive Masiyiwa. Econet is the largest mobile phone operator in Zimbabwe and has operations in several other African countries. Of its other business segments, the most prominent is Liquid Telecom, which has quietly and effectively built a 50,000 km fibre-optic network in sub-Saharan Africa. Crucially, it offers broadband connectivity in several cities in 17 countries.
Kwese was established in 2016 with the vision of disrupting the market. At the core of its strategy are consumers and access technology. It has signed up an impressive and diverse content portfolio, which includes sports such as Formula 1, football, basketball and cricket, as well as movies, children's programming and general entertainment. Recently, it signed an agreement with ESPN to broadcast the sports platform in Africa. Kwese's private ownership structure has afforded it the freedom to agree contracts with distributors speedily and effectively. And it's rightly pursuing a youth-focussed audience keen on sport, social media and entertainment.
But Kwese's real strength lies in access technology and this is where the company could be the real game changer, market disruptor and stimulator. It offers DTH access, like its rivals, but it's also able to deliver content through free-to-air and, crucially, digital channels. Although the latter can be provided over 4G infrastructure, Kwese benefits from having the same shareholder as Liquid Telecom and access to its independent fibre-optic network — the largest in Africa. This means customers will have a selection of technologies to access content. In several countries, they have the relative luxury of choosing from fibre-optic broadband (Liquid Telecom), DTH (Kwese), mobile broadband (Econet) or free-to-air (Kwese) services. This variety is common in Europe, but scarce in Africa beyond South Africa.
How Kwese executes its strategy will be crucial. Parent company Econet has a strong track record in successfully delivering new projects and has assembled an excellent management team at Kwese.
The next few years will be important. Market consensus seems to point to growth in the pay-TV market in Africa, from $4 billion to $6 billion in revenue over the next five years. If Kwese succeeds as a disruptor and stimulates competition, expansion and innovation in the market further, then $6 billion could be a conservative estimate.
It's always fascinating when new market entrants become game changers. MTN and Celtel — now Bharti Airtel — did it with mobile services in Africa. Sky did so with DTH in the UK and several other European countries. On a global scale, we can talk about how Amazon, Facebook and Google changed the e-logistics, social media and search engine landscapes without being the first to market. In five years, there's a chance Kwese could achieve the same in broadcasting in Africa, one of the final frontiers of genuine mass market growth.