Wananchi CEO Sees Strong Pay-TV Opportunity in “The Silicon Valley of Africa”

[Satellite News 06-06-11] Pay-TV in Africa has long been slated as a potential growth market for satellite, with low penetration and emerging middle class economies allowing DTH to hit the healthier mass markets of the continent.

    One company looking to take advantage of this new demand for service is The Wananchi Group, which aims to deliver a strong pay-TV offering to consumers with a focus on East Africa — a region that Wananchi Group CEO Richard Bell describes as the “Silicon Valley” of Africa.

    While the company has had a turbulent beginning and three different CEOs during the last year,Wananchi finds itself with a full commercial launch only weeks away. Bell spoke with Satellite News about what it will take for Wananchi to be successful and the unique approach it aims to take to markets in the next few years.

 

 

Bell: For a couple of years, Wananchi has been building a cable TV network here in Nairobi, and planning to build it across East Africa. As part of that, it became very clear that the real value proposition and what the consumer wants, is not just pay-TV, but they want quality content, which is not that surprising. It is tricky in Africa because there is not a large content industry here. Historically, the market has been restricted to a very narrow amount of content coming out of the historical incumbent.

 

 

Bell: We realized what we had to do was bring in a lot of new content from around the world that has never been seen here before, as well as create our own content. We have created a media division, which will produce eight of our own TV channels, and we had to bring in an additional 25-30 channels from Europe and North America with content that has never been seen before through our own undersea fiber optic cable. It has been a fairly substantial investment and undertaking.

    Having done all that investment for our cable business, it became clear that the consumers who could access our cable platform in the high-density urban areas were only a small portion of the total market across East Africa. That is why we decided to do a satellite platform. The satellite platform we now have has an instant footprint of 300 million people and 17 million existing TV households, and because we have a very compelling position in terms of our content we believe we are going to be able to change the face of pay-TV on the continent.

 

Bell: In May we went into a soft launch phase. We expect to do a full, hard launch towards the middle of the year.

 

 

Bell: I would not like to comment on the specifics. If you look at other companies in the region that have been successful, they have been managed by good, local management. Ex-patriot management has generally been less successful. We have also learned that lesson. We have now gone with a local management team. The company is also now fully funded.

 

 

Bell: It is a tricky question because of the peculiarities of emerging markets such as Africa. If we were discussing a European market or an Eastern European market, you could take some fairly accurate statistic and do some interesting extrapolations. In Africa in 1999, Safaricom did that exercise with mobile phones and came to the conclusion that they would get 500,000 subscribers in six years time in Kenya. Today, they have 16 million subscribers. The reason for that discrepancy is that here, people have realized that buying habits are not necessarily closely related to income levels.

    People will prioritize where to spend their small amounts of disposable income, and mobile phones were something that people really wanted, and were prepared to spend a large amount of their income on. We see the same thing happening with pay-TV. If you look at the addressable market today, there are 17 million TV households within the footprint of our satellite coverage. These households have televisions and electricity. That is the addressable market. If you then apply other statistics from other markets such as pay-TV penetration versus pay-TV availability in emerging markets, you get some pretty interesting numbers.

 

Bell: East Africa is rapidly becoming the Silicon Valley of Africa. There has been tremendous growth here in the last few years, particularly with the arrival of undersea cable. Media and IT industries have started to grow explosively on the back of this growing sophisticated, educated middle class. We see the economic future more on a regional basis, rather than a country-by-country specific future. What is really exciting about East Africa, is if you look at East Africa and add Ethiopia, that is 200 million people. They are becoming relatively integrated economies. If you add in some of the neighboring countries, it reaches 300 million people. We don’t see it as that country that is better than that country. We see a greater East Africa play going on and we will meet subscriber demand across the region. We see the whole region as a very exciting place.

 

Bell: I can’t go into specifics in terms of the capacity we are using, or what we have acquired, but with our satellite partner, we are now viewed as a key strategic partner on the continent, and expect our capacity needs to grow substantially during the next 18 months.

Bell: We have signed a turnkey contract with the Canadian company IDC. They have also provided the headend and an uplink facility. We are the first pay-TV operator ever to put in a headend and an uplink in sub-Saharan Africa. That is very large signal that we are a local company and we believe we have the skills and expertise in Africa to do these types of projects. They will also be providing the set-top boxes. These are MPEG4 HD boxes. Although we won’t have a significant HD offering at the time of launch, we definitely have a roadmap of adding HD very quickly after launch.

 

Bell: Our HD offering will come out later in the year. We are targeting a very competitive pricing point. We expect to launch our HD offering at the end of the year, once the subscriber growth has reached our target.

 

Bell: We expect to be profitable well within the horizons expected of our investors. But, I can’t give you any more details.