How GTV lost its brag

By Kenneth Kwama

Bitterness, anger and a brooding sense of injustice ruled the hearts of millions of soccer lovers and bar owners last week, on news that they could no longer watch or screen key English Premier League games.

Their mood was a far cry from that heady evening at the GoDown in Nairobi, when Julian McIntyre signed off on the launch of Gateway Television (GTV) at a ceremony ably mastered by celebrated thespian, John Sibi Okumu.

Then, surrounded by the glitterati of Kenya’s sport and entertainment scene, Kenya was, quite literally, at the feet of the pay TV channel’s founder and Managing Director, with ex-France and Chelsea defender Marcel Desailly on his elbow. All that was forgotten last week, when GTV abruptly cut off transmissions, effectively locking out millions of rabid fans of the Barclaycard Premier League, once dubbed "The greatest league in the world."

Suddenly, a lifestyle built on weekend afternoons and evenings hanging out together in sports bars, cheering on their teams and paying for crates of beer with their Barclaycards was gone.

All too soon, their calendars had undergone a forced and drastic change.

Kenyans had finally received a taste of what the global credit crisis, something they only read about in newspapers, could do to their lives. Millions in paid-up subscriptions now hang in the balance as are investments built on screening English Premier League games.

Gateway Broadcasting Services Ltd, which owns GTV, became a victim of its enthusiastic foray into the world’s credit markets, undone in the end by heavy borrowing.

The first signs that Julian’s house was on fire first manifested early last month, when a Swedish firm, Investment AB Kinnevik, with a major stake in the venture, and which had committed its funds to the longer term, suddenly decided to offload its stake, worth $23.6 million to Vodacom of South Africa.

"The exit is a consequence of the sale to Vodacom of GTV’s parent company, Gateway Telecommunications SA (Pty) Ltd, which provided the security for the equity loan in which Kinnevik was a lead investor," said Kinnevik.

Details of exactly how this could affect the firm’s local subscribers, estimated at 50,000, remained scanty, as GTV-Kenya staff, led by the General Manager Charles Waituka kept mum.

A statement from the parent company however, said that its board had unanimously approved a plan to liquidate it, and blamed the happenings on the global financial crisis.

Although the global credit crunch has been on the cards for more than one year now, many did not expect it to affect any major operator in Africa the way it did GTV. However, to understand the intricacies, one has to consider how the pay-TV venture was funded.

There are strong pointers that individual losses by some strategic investors in the pay-TV deal, could have significantly contributed to the collapse.

Besides Kinnevik, another strategic investor who betted big on the project includes banking giant Citigroup, which a few months ago revealed it had lost $3.1billion (about Sh250 billion or half of Kenya’s budget) in the US sub-prime mortgage market.

According to information posted on GTV’s website, which also quotes Julian McIntyre, President of Gateway Broadcasting Services Limited, Citigroup, alongside other strategic investors like Noonday Global Management and Avenue Investment Management, invested $40million in the deal.

The company also invested in the high-yield European Bond market late last year, in an effort to raise more capital.

GTV’s swift collapse has left the fate of about 11,000 employees, spread across the 22 countries in which it was operational, in doubt. It has also frozen millions of shillings invested by supporting businesses, and wiped out at least Sh15 billion invested by the company in its operations across the continent.

GTV’s fall, if it stays that way, could end up as the largest and most dramatic corporate flameouts in Africa. It has also roiled the pay television market in the country — a fact that its major rival for the local market, Multi-choice Kenya, said it was not willing to discuss yet. "We are still watching, and as things stand now, our position on the matter is that there is no comment. We will talk at a later date," Stephen Isaboke, General Manager of Multi-choice Kenya told FJ.

But a high-ranking official in the pay-television business in the country admitted to FJ that "confidence and credibility, which is what this business is all about, may suffer after this."

GTV’s woes are also bad for the pay-television market in Kenya, as it leaves Multichoice as a virtual monopoly. According to a recent report by Balancing Act, a London-based consultancy and research firm, GTV’s popularity in Africa was as high as 71 per cent last year August.

Although not much was forthcoming about remedial measures, by the time we went to press, it was clear the collapse of GTV had also left in tatters the reputation of the company that had clearly won the hearts of millions of football lovers across the country. With Sh15 billion in assets and other investments as at Friday last week, GTV becomes the biggest operator in Africa to succumb to the global financial turmoil.

Both Communications Commission of Kenya (CCK) and the Ministry of Information and Communications had not officially commented, but a CCK official who requested not to be named said they saw no dangerous ripple effect.

It is estimated that GTV had at least 50,000 subscribers locally, who had invested close to Sh750 million in satellite dishes and decoders. The equipments could be rendered useless if the company sinks for good.

It is also not clear whether these subscribers, some of whom had paid up to one-year’s full subscription, could be compensated, because the company under liquidation is the parent and not the local affiliate GTV-Kenya, which signed the local contracts.

A local liquidation process would have given the firm breathing space to deal with creditors’ claims, but the current situation is complicated, and many creditors, including subscribers are likely to come out empty handed.

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