Pay-TV provider Multichoice Group has ceded a 30 percent stake in its subsidiary GOtv Kenya Limited to unnamed local investors who did not pay for the shares.
The transaction, which reduced the South Africa pay-television giant's ownership in the business to 70 percent, was done to comply with local ownership rules.
The multinational did not name the Kenyan investors who took up the shares.
“(There) was a dilution of MultiChoice Africa Holdings B.V’s interest in GOtv Kenya Limited from 100 percent to 70 percent due to local shareholding requirements,” said the South African pay-TV group in a trading update.
“There was no carrying value related to the non-controlling interest in GOtv Kenya Limited prior to this transaction. No cash consideration was received.”
The company did not say why it did not receive cash in the deal or if it could get money from the new investors at a future date.
Companies usually allocate shares to new investors in exchange for cash. In other circumstances, firms may allot shares to settle a debt or in exchange for stock in another company.
In the different scenarios, there is an exchange of economic value.
Under local ownership rule changes that were published by the ICT ministry in 2020, the country's foreign-owned firms in the communications and mobile money sector must ensure they have a 30 percent local ownership.
GOtv is one of the most popular entertainment brands in the country, catering to the middle class with cut-price packages.
Its offerings include GOtv LITE and GOtv VALUE which are priced at Sh199 and Sh550 respectively per month.
Other packages are GOtv PLUS (Sh870), GOtv MAX (Sh1,150) and GOtv SUPA (Sh1,499).
The financial performance of GOtv Kenya was not immediately clear but its subscriber base declined seven percent in the year ended March, according to disclosures by its parent firm.
PayTV firms face the challenge of piracy and competition from online platforms such as Netflix and Youtube.
MultiChoice and other entertainment providers were big beneficiaries of lockdowns brought by the pandemic.
The push to introduce local ownership is mirrored in other African countries like Uganda where telecommunications firms are required to cede a 20 percent stake to local investors.
MTN Uganda was recently listed on the Uganda Securities Exchange through an initial public offering that saw it sell a 12.96 percent stake as it sought to comply with the regulations.
