The world of communications has become one of the fastest-changing environments, filled with daily challenges to its players. It has become a world where innovation and dedication have become invaluable tools for success. Since our inception in 1986, we have risen to this challenge and have evolved from a television platform operator to a global electronic media company with television platform operations spanning more than 40 countries and a global technology group providing interactive media-related software solutions to many of the world's electronic television operations.
MIH Limited (MIHL) operates pay-television services internationally in three regions: Africa, the Mediterranean, and Asia. It provides analog and digital service in Africa and Asia and is awaiting legislative approval to add digital service to its analog service in the Mediterranean. The firm's strategy emphasizes being the leading supplier of pay-television services, obtaining exclusive programming, improving customer care, and offering new services and technology. In each market it serves--South Africa, the rest of sub-Saharan Africa, Greece, Cyprus, and Thailand--MIHL is the leading pay-television operator. In most of its markets MIHL has exclusive pay-television rights to transmit premium movies, major sporting events, and popular children's programming.
In addition, MIHL provides a comprehensive package of technology products and support services through Mindport, its technology division, to pay-media operators worldwide. Mindport's customers include leading international pay-media companies as well as the company's own pay-television businesses. Mindport is focused on the pay-media industry's evolution from analog to digital transmission as well as on interactive and Internet services. Since 1997 MIHL also has been involved in providing Internet services in South Africa, where it developed and spun off M-Web Holdings Ltd. as the country's leading Internet service provider.
Operation of Pay-Television Services: 1986--91
MIH Limited was incorporated on July 26, 1991 in the British Virgin Islands and its corporate offices are in The Netherlands, but the company was first established in 1986 as M-Net Ltd., a television platform operator in South Africa. M-Net Ltd. was formed by several large South African media companies and was South Africa's first ever pay-television service provider. Its license to broadcast was first obtained on October 17, 1985, from the South African Minister of Posts and Telecommunications.
In 1990 M-Net was publicly listed in South Africa on the Johannesburg Stock Exchange (JSE). The next year MIHL was incorporated in the British Virgin Islands. Its principal activity was the operation of pay-television services. In 1991 MIHL acquired FilmNet, a leading pay-television operator in Europe serving the Benelux countries of Belgium, The Netherlands, and Luxembourg, and Scandinavia.
Expansion and Reorganization: 1992--95
In 1992 the company entered the cellular telephone business when it joined a consortium that obtained the second GSM cellular license ever awarded in South Africa. Through the consortium it owned a one-quarter interest in the cellular telephone operator, Mobile Telephone Networks Holdings (Proprietary) Ltd. (MTN), and subsequently increased its ownership to slightly more than one-third. In 1995 MTN was spun off as a new corporation, M-Cell Ltd., which was listed publicly on the Johannesburg Stock Exchange.
In October 1993 a new company, MIH Holdings (MIHH), was split from M-Net Ltd. MIHH would include M-Net's subscriber management, signal distribution, and cellular telephone businesses as well as its holding in FilmNet. M-Net continued to hold other corporate operations and provide pay-television programming. MIHH retained a controlling interest in M-Net, which eventually focused on providing premium film channels for MIHL's pay-television subsidiary in Africa, MultiChoice Africa (MCA).
Pay-Television Services in Europe, Africa, and the Middle East: 1995--97
In 1995 MIHH merged its global pay-television operations with those of Richemont S.A. to form a new venture called NetHold B.V., which MIHH held through MIHL. From 1995 to March 31, 1997, MIHL's main activity was its 50 percent share in NetHold, which had pay-television operations in Africa, Greece, Cyprus, the Middle East, the Benelux and Scandinavian countries, and Italy. The company's pay-television service in Greece and Cyprus began in 1994 and was operated through its subsidiary, NetMed Hellas.
In March 1997 MIHL and Richemont merged most of NetHold with Canal+, the French-based pay-television operator, in a deal that valued NetHold at $1.8 billion. MIHL retained NetHold's African, Mediterranean, and Middle East pay-television businesses, acquired 49 percent of Irdeto, a provider of conditional access and encryption technology services, and received an interest in Canal+. MIHL later acquired the remainder of Irdeto from Canal+ in January 1998, and Irdeto became part of MIHL's Mindport division. MIHL subsequently sold its interest in Canal+ to fund expansion in Asia.
Reorganization and Expansion into Asia and Internet Services: 1997--99
Effective March 31, 1997, MIHL sold its interest in NetHold to Canal+ in exchange for a five percent share in Canal+ and all of NetHold's pay-television businesses in Africa, Greece, Cyprus, and the Middle East. MIHL realized a gain of $540 million on the sale of its interest in NetHold. Subsequently, MIHL paid $17.7 million in cash to Canal+ for a 49 percent share in Irdeto.
During fiscal 1998 (ending March 31) MIHL sold its shares in Canal+ for $262 million, resulting in a gain of $3 million. Then the company began to expand in Asia, develop an Internet service in South Africa, and diversify into other related areas.
In 1997 MIHL began purchasing an interest in its Thai pay-television joint venture, United Broadcasting Corporation Public Company Ltd. (UBC), then known as International Broadcasting Corporation Public Company Ltd. (IBC). UBC was founded in 1985. In 1989 UBC entered into a joint venture with Mass Communications Organization of Thailand (MCOT), one of two primary media regulators in Thailand, to provide subscription television service. Under subsequent amendments, UBC was allowed to provide subscription service to the whole of Thailand, using satellite to provide a direct-to-home service to the entire country, cable in the provincial areas, and other services as permitted.
MIHL gradually increased its ownership interest in UBC and its subsidiaries. During fiscal 1998 MIHL invested an additional $17.7 million in UBC. Following IBC's merger with UTV Cable Network Public Co. in February 1998 to form UBC, MIHL's interest in the new merged entity was 17.3 percent. MIHL's shares in UBC were pledged as security for a revolving credit facility. MIHL's principal investment partner in UBC was Telecom Holding Company Ltd., which owned about 41 percent of UBC. During fiscal 1999 MIHL increased its interest in UBC from 17.3 percent to 27.8 percent for a consideration of $67 million. MIHL expected to exercise options to increase its interest in UBC to 31.1 percent.
UBC's pay-television business consisted of a digital satellite service, a cable television service, signal transmission and distribution, and the production of pay-television channels featuring movies, drama, educational programming, news, and sports. MIHL conducted its development operations in Asia through an office in Hong Kong.
MIHL contributed its acquired Internet businesses to the start-up of a South African Internet service provider, M-Web Holdings Ltd. (M-Web), in 1997. M-Web was created through a series of transactions, with MIHL contributing its Internet-related businesses to the new entity, M-Web Holdings Ltd., and subsequently capitalizing it with a special dividend to MIH Holdings. During 1997 MIHL had acquired several Internet-related businesses in South Africa for about $21.5 million. These were sold on October 1, 1997, to M-Web Holdings Ltd., for $20.5 million. M-Web's shares were linked to those of MIHH on the Johannesburg Stock Exchange in South Africa. By December 31, 1998, M-Web was the leading Internet service provider in South Africa, with nearly 127,000 subscribers.
MIHL also was expanding more into technology. In 1997 it began investing in OpenTV, Inc., a California-based company that produced operating systems for interactive television. MIHL started with a 44.5 percent interest, which it acquired in January 1998 for $15.5 million, and increased it to 80.1 percent in March 1999 through a transaction with Thomson Consumer Electronics Inc.
In January 1998 MIHL acquired the remaining 51 percent of Irdeto for $11 million in cash. As part of MIHL's Mindport division, Irdeto Access provided conditional access systems for both analog and digital broadcasting platforms. Its products were installed in more than 3.6 million decoders on more than 25 broadcasting platforms. Its clients included, for the most part, television platform operators, but it was developing applications for data broadcasters and other information providers. A new product, M-Crypt, was launched during fiscal 1999 (ending March 31) for smaller pay-media operators.
In other activities MultiChoice Africa (Proprietary) Ltd. (MCA), an indirect subsidiary of MIHL, transferred 28 million shares of Electronic Media Network Ltd./SuperSport International Holdings Ltd. (M-Net/SuperSport) to the Pluthuma Futhi share scheme to promote black empowerment in April 1998. MIHL received a consideration of $22 million. MCA retained a 19.8 percent interest in M-Net/SuperSport. SuperSport provided premium pay-television sports coverage for all of Africa. It became a separately listed company on the Johannesburg Stock Exchange in early 1998.
During fiscal 1999 MIHL acquired TV/COM International Inc., a San Diego-based pay-technology company, for $14.5 million and added it to its Mindport division. The acquisition gave Mindport greater intellectual property rights to technology it used as well as a basis for penetrating the U.S. market.
Following the close of its fiscal year on March 31, 1999, MIHL became a publicly listed company on NASDAQ and the Amsterdam Stock Exchange in April. The company's initial public offering (IPO) raised $187.8 million before expenses through the sale of nine million Class A ordinary shares. A substantial portion of the proceeds were earmarked to finance acquisitions of pay-television services, Internet services, interactive television services, and pay-media technology businesses in different countries. Following the IPO, MIH Holdings continued to retain effective voting control over MIHL through its ownership of the company's Class B ordinary shares.
For fiscal 1999 ending March 31, MIHL reported net revenues of $610.1 million, up from $501.5 million in fiscal 1998. It reported an operating loss of $44 million and a net loss of $68.8 million for fiscal 1999.
Simultaneously with its IPO, MIHL increased its ownership of OpenTV by acquiring Thomson Consumer Electronics Inc.'s entire interest in OpenTV in exchange for MIHL Class A Ordinary shares, which were issued when MIHL went public. MIHL then sold a portion of its interest in OpenTV to Sun Microsystems for $9 million in cash. Following the sale to Sun, MIHL had an 80.1 percent ownership interest in OpenTV, and Sun owned the remaining 19.9 percent. In June 1999 Sun's chief strategy officer, William J. Raduchel, accepted an invitation to join MIHL's board of directors.
OpenTV provided operating systems, development tools, applications, and related technical services for interactive television. The OpenTV system can be downloaded from a pay-television provider directly into each viewer's decoder. The system works with a wide range of decoder configurations and conditional access systems. It has been used to generate electronic program guides, simple gaming concepts, home shopping and virtual weather channels, as well as a variety of pull-down menus to enhance broadcasting programs.
OpenTV delivered its operating system for interactive television to BskyB, which launched its service in the United Kingdom in October 1998. By March 1999, when MIHL became an 80 percent owner of OpenTV, its operating system already was deployed in more than two million decoders, and the OpenTV operating system software was licensed to 22 manufacturers of digital receivers worldwide.
MIHL's businesses were focused in two areas, technology and the operation of television platforms in different countries. Its technology assets were grouped in the company's Mindport division, which provided technology solutions to media companies worldwide for interactive television operating systems, subscriber management, conditional access, and other pay-media applications. MIHL had plans to transform Mindport from a division into a subsidiary as a holding company for all of the company's technology assets.
In the technology area, Mindport and OpenTV have strengthened their positions and were poised for clients to roll out new services during the coming year. Television platforms were experiencing significant change, especially the partial integration of television platforms with the Internet through interactive television applications. Mindport technology was chosen by the Chinese state broadcaster, CCTV, for use in its new satellite service, CBSat, which was established to broadcast eight channels to rural areas not receiving broadcast signals. The service was successfully launched in January 1999, and MIHL expected that the trial system would be expanded and additional integrated receiver decoders would be ordered.
Other Mindport operating units included Mindport Integrated Business Systems, which provided subscriber management products to clients in 27 countries, including third-party companies as well as MIHL companies; Mindport STB, which produced digital and analog decoders; Mindport Media Commerce Technologies, the content management unit that produced a software system for all of a platform operator's programming and scheduling operations; and Mindport Solutions, which offered business consulting and systems integration services to pay-television providers.
MIHL also operated television platforms in Africa, the Mediterranean region, and Asia, through various direct and indirect subsidiary companies, joint ventures, and associated companies. These included MultiChoice Africa (MCA), MultiChoice Middle East, MultiChoice Egypt, NetMed Hellas, MIH Asia, and UBC. During fiscal 1999 MultiChoice Africa launched a new division, International Gaming Networks (IGN), to penetrate the relatively new sports betting market in South Africa.
During fiscal 1999 the overall subscriber base serviced by MIHL increased to more than 1.9 million subscriber households. MCA had a subscriber base of nearly 1.3 million households in more than 40 countries across Africa and adjacent islands. The company continued to experience a trend of analog subscribers migrating to digital platforms.
In Greece and Cyprus, regulatory problems delayed the launch of a digital business. MIHL expected, however, to have a license awarded and to launch its digital satellite service in early 2000s through its subsidiary, MultiChoice Hellas.
In Thailand, the subscriber base grew to 300,000 households following the merger of IBC and Cable Network Public Company (UTV) to form UBC. MIHL intended to focus on developing television platform and online Internet service opportunities in Southeast Asia and China.
Principal Subsidiaries: MultiChoice Africa (South Africa); MultiChoice Middle East (Dubai); MultiChoice Egypt; NetMed Hellas (Greece); MIH Asia (Hong Kong); United Broadcasting Corporation Public Company Ltd. (Thailand); TV/COM International Inc.; OpenTV, Inc.; Irdeto Access (France); Electronic Media Network Ltd. (South Africa); SuperSport International Holdings Ltd. (South Africa).
Principal Divisions: Mindport.
Principal Competitors: MediaHighway; Enhanced TV; Power TV; NCI; WebTV; MediaGuard; ViaAccess; NDS; NagraVision.