COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 124/LM/Nov07
In the matter between:
Sabido Investments (Pty) Ltd Acquiring Firm
Sabido Properties (Pty) Ltd
and
Sasani Africa (Pty) Ltd Target Firm
The letting enterprise conducted by
Tiradeprops 3 (Pty) Ltd
Panel : Y Carrim (Presiding Member), N Manoim (Tribunal Member),
and M Mokuena (Tribunal Member)
Heard on : 5 March 2008
Order Issued : 6 March 2008
Reasons Issued: 10 April 2008
Reasons for Decision
Approval
1] On 6 March 2008 the Tribunal unconditionally approved the merger between
Sabido Investments (Pty) Ltd, Sabido Properties (Pty) Ltd and Sasani Africa
(Pty) Ltd and the letting enterprise conducted by Tiradeprops 3 (Pty) Ltd. The
reasons for approving the transaction follow.
The transaction and parties
2] The acquisition comprises two separate but indivisible transactions. Sabido
Investments (Pty) Ltd (“Sabido”) will acquire the entire issued share capital and
outstanding loans account of, and claims in, Sasani Africa (Pty) Ltd (“Sasani”).
In a second transaction Sabido will also indirectly, through its subsidiary Sabido
Properties(Pty) Ltd (“Sabido Prop”), acquire the letting enterprise conducted by
Tiradeprops (Pty) Ltd (Tiradeprops”) as a going concern. The letting enterprise
is inextricably linked to the fixed assets and facilities which form part of the
Sasani transaction and the deal will accordingly collapse should one leg fail.
3] The primary acquiring firms are Sabido and Sabido Props. Sabido is controlled
by Hosken Consolidated Investments Ltd (“HCI”), a company listed on the JSE
Securities Exchange. HCI directly and indirectly controls various firms including
Sabido, which, for our purposes, is the only relevant subsidiary. Sabido
controls:
• e.TV (Pty) Ltd (“e.tv”)
• Sabido Props
• Viamedia (Pty) Ltd (“Viamedia”)
• Yired (Pty) Ltd (“Yired”)
• Three Blind Mice Communications;
• Dreamworld1
• e.sat TV (Pty) Ltd (“e.sat”)
4] The target firms are Sasani and the letting enterprise of Tiradeprops. Sasani is
controlled by Amrite investments (Pty) Ltd and Tiradeprops is jointly controlled
by Amrite and Sasani Ltd. Sasani controls the following firms:
• Learningthings Africa (Pty) Ltd
• Memar Television (Pty) Ltd (dormant)
• Vision Film (Pty) Ltd
Rationale for the transaction
5] According to Sabido the transaction will enable it to acquire studios for the
purpose of producing local content for its broadcasting needs. According to
Sasani the transaction will ensure greater financial security for Sasani.
1 Sabido holds 42.48% of the interest in Dreamworld. The parties did not supply the
Commission with a copy of the shareholders’ agreement or the voting pool agreement and the
Commission could accordingly not confirm whether Sabido holds a noncontrolling stake.
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The relevant market
6] The acquiring firm owns e.tv, a private freetoair terrestrial broadcaster of
programmes such as news, local dramas, movies and sports. It also owns a
property holding company that lets commercial office space. The target firm is
engaged in the hiring out of fully equipped studios and postproduction facilities
situated in Highlands North, Gauteng, also referred to as a media park.
Independent producers hire these studios for the production of local content
shows to be broadcasted over TV.
7] The properties owned by both merging parties do not compete in the same
product markets as Sabido owns commercial office space while Sasani,
through Tiradeprops, owns a media park. The Commission accordingly found
that there is no horizontal overlap in the activities of the parties. However, the
transaction will result in vertical integration as e.tv from time to time
commissions independent production houses to produce local content
programmes which are filmed at facilities such as the media park owned by
Sasani.2
8] The two relevant product markets are thus:
• The upstream market for hiring out studios for TV production
• The downstream market for TV broadcasting
9] The geographic markets in which these activities are conducted are defined by
the Commission as regional for the upstream market, since most of the players
indicated that they mainly regard players in the same provinces as their
competitors, and national for the downstream market as broadcasting is done
on a national basis.
Competition Analysis
10] For purposes of this transaction we will only consider the effect of the
transaction in the upstream market in light of the fact that the downstream
2 According to Sabido, in terms of its license conditions e.tv is required to commission all local
content other than news and current affairs programming from independent companies.
3
market is regulated. There are currently three competitors licensed to
broadcast television in South Africa, namely the National broadcaster SABC
and two independents, e.tv and MNET, the latter being a payTV broadcaster.
ICASA, the regulator, recently issued licences to four new payTV operators.
11] All the broadcasters own their own studios and are thus vertically integrated.
The market for the hiring of studios
12] The main competitors and their market shares in the market for the hiring of
studios for television productions in Gauteng are:
Competitor Estimated studio
size m ²
% market share
SABC Henley Studios 2500 21
Atlas Studios 1800 14
Q Studios 1700 14
Sasani 1600 13
MNET Studios 1500 12
Urban Brew 1000 8
Lone Hill Studios 900 7
Fox Street Studios 3 800 6
Red Pepper 700 6
Total
12 500 100
3 Leased by Sasani from Absa on a short term basis.
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13] MNET does not make its studios available to independent production houses
when they produce programmes for other broadcasters. SABC, however, does.
The Commission nevertheless considered Sasani’s market share if one
excludes the market shares of both SABC and MNET studios. Sasani will have
a market share of 28% 4 of the studio space if SABC and MNET studios are
excluded. Sasani has also commenced the construction of an additional two
fully equipped 1000m ² stages that will be operational from 1 April 2008 which
will be used for e.tv’s two local productions Rhythm City and Scandal. 5 There is
thus a strong indication that Sasani is one of the major players, if not the
largest, in Gauteng.
14] Barriers to entry in this market are low. Q studios, Urban Brew and Atlas
studios recently entered the Gauteng market. The merging parties also
indicated that there are various new facilities being developed in Gauteng and
that switching studios between competitors were taking place. Starke
Productions is currently constructing two new 600m ²studios in Randburg,
Gauteng, for the production of television drama series. According to Sasani it
lost the contract for the production of the series “Binnelanders” which Sasani
currently services out of its Fox Street studios to Starke Production. The series
will now be produced at Starke Productions’ new facilities in Randburg. Other
developments are a 6000 m ² complex being developed by LP Unlimited in
Irene which will cater for both television and film productions. Ochre
productions also indicated to the Commission that it was switching production
of its Takalani Sesame series from Sasani’s studios to Theron studios in
Midrand.
15] There are thus alternative studios that can supply independent production
houses with their studio requirements. The transaction is thus unlikely to result
in input foreclosure.
4 This figure includes the studio space that Sasani hires from Fox Street Studios.
5 According to an independent report requested by the Commission, see page 735 of the
record, e.tv will use its inhouse studio facilities, currently used for the two local drama
productions, to broadcast its 24 hour news service.
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16] The Commission also found that the transaction will not lead to customer
foreclosure. In terms of their license requirements all broadcasters are required
to air locally produced programmes for a certain number of hours per week in
order to fulfil their public service obligations. The percentage of time allocated
to local content programmes per week, in terms of their licence obligations, are
as follows:
• SABC 71%
SABC 1: 29%
SABC 2: 30%
SABC 3 :12%
• MNET 16%
• e.tv 12%
17] Thus even if e.tv decides to force independent producers to utilise only its
studio facilities post the transaction such action would not foreclose customers
as its local content requirements are small in relation to the other broadcasters,
specifically the SABC. Both MNET and SABC have indicated to the
Commission that they do not have enough studios available to satisfy their local
content requirements and are accordingly also using independent studios. Only
15% of MNET’s local content programming, for example, is produced at its
studios. Thus a significant portion of MNET’s local content requirements are
satisfied by third party studios.
18] The transaction is therefore unlikely to lead to customer foreclosure.
19] In light of a previous complaint filed with the Tribunal in which the independent
producer organization complained that it was forced by the SABC to use its
more expensive facilities when commissioned by SABC, therefore squeezing its
margins, the Tribunal wanted to know whether e.tv would also require its
independent producers to only use Sasani studios post the transaction.
20] According to Sabido it will not have the ability, post the transaction, to favour
Sasani’s studios over and above other studios when it commission’s
independent producers because independent production companies negotiate
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directly with the studios while the broadcaster does not have any interaction
with the companies that hires out studios. The decision on which studio to use
is based on objective factors such as convenience, reputation, security, back
up and price. It also explained that when it negotiates with independent
producers the producers present a budget. If they don’t use e.tv’s studio a
producer’s fee is paid to them as opposed to when they use the broadcasters’
facilities cost free and they earn a percentage of the cost as a fee. In following
the cost plus basis approach e.tv is thus incentivised to lower its cost of
production and it would therefore not be able to squeeze the margins of the
independent producers by raising the cost of studio productions.
21] We accordingly find that the transaction will not prevent or lessen competition
in the upstream market for the hiring of studios for television productions.
Public Interest
22] The transaction does not give rise to any public issues concerns.
________________ 10 April 2008
N Manoim Date
Tribunal Member
Concurring: Y Carrim and M Mokuena
Tribunal Researcher : R Badenhorst
For the merging parties: Edward Nathan Sonnenbergs
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For the Commission : Mfundo Ngobese (Mergers and Acquisitions)
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