Gupta TV’s big bid deemed ‘illegal’

2016-02-21 12:00

The Guptas’ ambitious plan to turn ANN7 into the country’s primary source of TV news was dealt a significant blow after an independent legal opinion warned that it would be illegal to award them the licence.

The Independent Communications Authority of SA (Icasa) put out a tender for the coveted free-to-air digital broadcast licence in 2014.

Infinity Media Networks, which owns ANN7, is one of four bidders – the company is 40.25% owned by various members of the Gupta family and 9.45% owned by President Jacob Zuma’s son Duduzane.

Documents filed as part of its bid show that Infinity wants to go head-to-head with both the SABC and to become the first free-to-air, 24-hour news channel, which will broadcast news from all nine provinces in English, isiXhosa and isiZulu.

The licence would allow them to move off the DStv platform, where they have a reach of less than 2 million people, to free TV, where their reach could be as high as 12 million viewers.

But a leaked legal opinion commissioned by Icasa from the law firm Mkhabela Huntley Adekeye Inc has warned the regulator that awarding the tender to Infinity would be “in contravention of the principle of legality”, and advised it to reject Infinity’s bid.

Despite receiving the legal opinion almost a month ago, Icasa spokesperson Paseka Maleka said on Friday that the regulator “is still considering all applications and submissions received”.

“No decision has been made yet as all applications are being deliberated on through internal processes,” he said.

According to the legal opinion, the key problem with Infinity’s bid is that the company contravenes the foreign ownership clause in the Electronic Communications Act because it is 37.1% foreign-owned and substantially controlled by one of its major shareholders – Essel Media in India.

In written responses, Infinity’s lawyers argued it should still be granted the licence on the understanding that it would change its shareholding after it was awarded the licence.

“Our client, quite candidly and honestly, disclosed the fact that it does not, as things currently stand, comply,” Infinity’s lawyers stated.

“Our client indicated that should it be given a licence, the shareholding will change.”

Despite Infinity predicting that it would be making yearly profits of R534 million within 10 years, it argued that it was unreasonable of Icasa to expect it to “go through the trouble and expense” of changing its shareholding at this stage.

“There is, simply, no reason to change the shareholding at this stage because our client is not in a position to ascertain whether or not its application will be successful,” a submission from August 2015 states.

“It cannot be expected of our client, at this stage, to go through the trouble and expense of changing its shareholder’s agreement and foreign shareholding to comply with this section of the act, when it is not even certain that the licence will be granted.”

However, this argument does not appear to have convinced Icasa’s legal advisers.

In their opinion, dated January 26 2016, they warned the regulator that “the authority does not have the discretion” to agree to Infinity’s proposal, and “would be in contravention of the principle of legality and susceptible to a legal challenge” if it did so.

“Applicants,” they state, must “be eligible to be granted the licence as at the time of the submission”, and condoning Infinity’s noncompliance would be “ultra vires [beyond the legal power or authority], or unauthorised, as a result”.

Despite the presence of Duduzane Zuma’s Mabengela Investments as one of the shareholders, the opinion also noted that Infinity “did not provide any verification certificates or other similar evidence regarding its compliance with the broad-based BEE obligations imposed by the [act]”.

Asked to comment on the legal opinion, The New Age CEO Nazeem Howa said: “The opinion attributed to Icasa constitutes new information to Infinity Media. As such, it would be inappropriate for us to comment until we receive this formally from Icasa.”

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February 16 2020