1. What does MFD do?
· MFD is a German company which was founded in September 2005 and is based in Düsseldorf and Cologne.
· It is the first and only German mobile TV provider.
· It has established a broadcasting network in 16 metropolitan areas across Germany.
· MFD delivers Mobile TV via the T-DMB standard.
· The mobile TV service is branded “watcha” and comprises 4 television channels and one visual radio channel. The four television channels are:
- ZDF, Germany’s national public TV broadcaster;
- N24, a news channel provided by ProSiebenSat1 Group. (The Group has diverse media interests in Germany offering 4 Free TV channels while also operating a Pay TV offering called Seven Senses);
- P7S1 Mobile, another ProSiebenSat1 Group channel produced specifically for mobile; and
- MTV, the popular music channel.
The visual radio channel is a radio channel with visual slides offering more information about the track that is playing, very similar to DMX radio, currently carried on DStv.
· MFD sells the package of channels on a wholesale basis to distribution partners.
· The technical coverage of DMB in Germany amounts to approximately 16 million people = approximately 20 percent of the German inhabitants.
· The content package is sold to the distributors at approximately EUR 5 per user and the service provider is then entitled to sell that at a markup to the end consumer or bundle it with telephony services.
2. Competitive environment
· MFD is the first and only mobile TV operator in Germany.
3. Rationale for the investment
· This investment is in line with our strategy to invest in new media technologies.
· MFD has entered into a tender process to acquire DVB-H frequencies in Germany.
· Mobile TV is a new media format and there are only a few countries worldwide where it has been commercially launched or where there is a test case.
· Naspers has had a strong focus on mobile TV over the last 18-24 months.
· Through our technology subsidiary Irdeto we’ve sold some 3 million mobile broadcast solutions to TU Media in Korea.
· In South Africa Naspers has been running Mobile TV trials through its subsidiary MultiChoice using the DVB-H technology standard for the past 18 months.
· The trials have proved to be successful and MultiChoice is waiting for the South African Regulator to grant a commercial license in order to commence operation.
· MultiChoice has also been allocated DVB-H licenses in Namibia and Kenya and intends rolling out DVB-H networks throughout the African continent.
· MultiChoice has gained considerable operational and technical expertise through the trials it has conducted thus far.
4. Why Germany – this is a developed country not a developing country?
· Although Germany is a developed market, mobile TV is still in its infancy worldwide and there are only a few markets where it has been commercially launched.
· Also, terrestrial broadcasting requires frequencies which are tightly controlled in most territories.
· MFD currently holds certain DMB licenses in L-Band and has applied to be allocated a DVB-H national frequency in accordance with the current DVB-H application process in Germany.
· MFD, being the only Mobile TV operation in Germany has a good chance of obtaining the license.
· As such where an opportunity arises to be able to partner with an operation that has frequencies or is in a good position to obtain frequencies, we will definitely consider it.
· This is a rare opportunity which has presented itself which we believe we need to take advantage of.
· Through our experience to date we believe we are well positioned to leverage our knowledge in other markets, developing or developed.
5. Who are the other shareholders and can you increase your stake?
· As at the close of the transaction Naspers, through MIH, holds 37.5% with the balance being held by the two joint managing directors, a German VC fund and two private individuals.
· At this stage it is uncertain whether we could increase our stake.
6. Management
· MFD has joint Managing Directors being Henrik Rinnert and Dr. Jens Stender.
7. Are there any regulatory issues?
· For an operator to broadcast in Germany both a frequency license and a broadcast license are required.
· MFD currently holds certain DMB licenses in L-Band and has applied to be allocated a DVB-H national frequency in accordance with the current DVB-H application process in Germany.
8. How much did you buy it for? How did you arrive at a valuation?
· The value of the investment is commercially sensitive and has not been disclosed.
9. Financial info
· The business is still in a start up phase and no financial information has been disclosed.
10. Salient terms
· Amongst other terms, this allows:
· Board representation.
· The right to nominate a senior operating officer.
· Pre-emptive rights and rights of first refusal over share transfers.
· Monthly meetings with management and provision of financial and operational information.
· Customary minority protections and governance rights.
11. Conditions precedent
· There are certain regulatory approvals that are required before we become a shareholder in this business.
· The process to obtain these approvals is underway and we expect the transaction to close shortly.
12. How does the bidding process for the DVB-H licence work?
· Every Federal State in Germany has its own DVB-H tender. That means that MFD applies in every Federal State.
· The decision of the Federal States about the DVB-H tender has to be consensual.
· The media regulator for Baden-Wuerttemberg, LFK, has begun the process for the launch of nationwide DVB-H services and the media regulator for Saarland, LMS, is going to close the DVB-H tender May, 30th.
· LFM (media regulator of North Rhine-Westphalia) will coordinate the procedure for selecting a DVB-H service provider with the media regulators from other Länder/Federal States.
· Candidates can submit their request for a nationwide DVB-H license which should allow for an offer of 16 television and radio programme services (in QPSK modulation).
· Criteria for selecting the DVB-H operator include service offering, coordination between service providers, marketing strategy, financial arrangements for the network roll-out and functionalities of the end-receiver.
· As part of the service offer, viewers must have access to regional content and radio services.
13. Other general info
Mobile standards
T-DBM is a standard that has gained some acceptance worldwide with the major commercial network rollout taking place in South Korea. DVB-H is fast becoming the accepted standard in Europe and other countries worldwide.
German vs SA mobile market
The German mobile market is almost identical to the South African market in that the value chains are identical. The mobile operator sells to service providers who in turn service the customer. The handsets are subsidized to the postpaid market with no handset subsidies to the prepaid market. The market has approximately a 50/50 split between post and prepaid users.
14. German mobile operator statistics
1. What does MFD do?
· MFD is a German company which was founded in September 2005 and is based in Düsseldorf and Cologne.
· It is the first and only German mobile TV provider.
· It has established a broadcasting network in 16 metropolitan areas across Germany.
