When Times Media Group trumpeted in a statement to shareholders last week that it had acquired 60% of radio station Vuma FM for R25,6m, it failed to inform them of impending litigation involving the Durban-based radio station that could jeopardise its future.

TechCentral is in possession of court papers, in which a consortium called KZN Talk Radio is seeking an order rejecting the awarding of a licence by broadcasting regulator Icasa to Vuma FM. The matter is set to be heard by the high court in Johannesburg this week.

Vuma FM — previously known as One Gospel KNI FM — was one of 15 bidders for the commercial sound broadcasting licence in the lucrative KwaZulu-Natal market. Icasa formally awarded it the licence in May 2012. But in court papers, KZN Talk, which is chaired by businessman Sandile Zungu, argues that Icasa’s decision to reject its application was “materially wrong by an error of law”.

KZN Talk’s shareholders include Primedia (with a 24,9% stake), which already holds a number of radio station assets, including Talk Radio 702, Cape Talk and Highveld Stereo, and MSG Afrika, the company behind newly launched Johannesburg station Power FM.

The KZN Talk consortium has brought its court application on a number of grounds, among them that Icasa “wrongly took the view that a 20% shareholding in a licensee amounted to ‘control’ of that licensee, whereas on a proper construction of the Electronics Communications Act, this is not the case”.

The consortium argues, too, that Icasa’s decision was procedurally unfair in that it afforded One Gospel an opportunity to remedy what would otherwise have been a breach of the law. It did not afford a similar opportunity to KZN Talk, according to the affidavit.

The affidavit says that legislation enjoins Icasa to ensure that broadcasting licences are controlled by a diverse range of communities. The authority found that the consortium was controlled by Primedia, with its 24,9% stake. Primedia already owned four other commercial radio services in South Africa. MSG Afrika, with a licence in Gauteng, held a further 20% stake. It said that awarding the licence to KZN Talk would, by virtue of Primedia’s shareholding, be a breach of the Electronic Communications Act.

At the heart of the dispute is what constitutes control under the legislation, with KZN Talk arguing that the common law definition of control should be applied. “If this interpretation is correct, the rejection of KZN Talk’s application is unsustainable as a matter of law as neither Primedia nor MSG Afrika could be said to be in control of KZN Talk,” the affidavit says.

KZN Talk argues, too, that Icasa acted unfairly procedurally by giving One Gospel the opportunity for one of its directors, a Ms Motanyane, to resign to ensure it complied by the provisions of the act. The director did so, but only after the licence was awarded.

“While One Gospel was given the opportunity to bring its management structure into line with the [Electronic Communications Act] — by ensuring that a director resigned after its licence was granted — KZN Talk was given no similar opportunity to commit to bringing its shareholding structure into line with the provisions of the [act] as interpreted by Icasa,” it says in the affidavit.

KZN Talk should have been given the opportunity by Icasa to ensure that the shareholding of both Primedia and MSG Afrika was diluted to less than 20% if deemed necessary, it adds. The two companies would have done so if they had been given the opportunity, the consortium’s court application says.

But in an answering affidavit, One Gospel executive chairman Abe Sibiya argues that KZN Talk’s argument in this regard is “contrived and incorrect”, saying that the issue of overlapping directorships was “squarely and publicly raised as a concern at the hearing of One Gospel’s application before Icasa, obviously without any finding being made at that point in time”.

“Immediately, in response thereto, One Gospel provided an unequivocal and unqualified undertaking regarding [Motanyane’s] resignation in order to preclude any issue or impediment to the award of the licence… This was not disputed or put into issue by anyone [and] she resigned on 4 April 2012, before the licence was issued.”

One Gospel, which claims it has invested more than R12m in starting the radio station, argues that KZN Talk’s suggestion that a double standard had been applied is “incorrect as a matter of fact and, in consequence, of law”.