But just as significant an immediate problem is how some of the biggest online music services in the nation are also breaking copyright law.

The just-published Copyright Review Commission’s 223-page report tells the government that South African content makers have no optimism about digital exploitation because only 14 percent of mobile services have licenses for the music they offer, while their umbrella body refuses to make them pay the local mechanical royalties collector. Only one, Vodacom, pays royalties for using sound recordings:

“Wireless Application Service Providers (WASPs) have been selling ringtones since 2000. An overwhelming majority … have paid no royalties … and have profited 100% from the digital exploitation of authors’ copyright works for almost a decade.

“Their continued use of composers’ works without paying royalties is unauthorised in terms of the Copyright Act. The majority of mobile providers (and, by implication, consumers) are dealing in infringing sound recordings and may be held criminally liable for copyright infringement.”

The mobile operators’ apparent intransigence is despite South African royalty rates being the lowest amongst eight countries benchmarked by the Copyright Review Commission - Brazil, France, India, Norway, Senegal, Switzerland and the UK.

The commission recommends royalty collection societies should sue mobile operators for their money, and it calls for bans on ISPs who do not recompense artists.

Spending on physical music in South Africa is forecast by PwC to dip by 10.4 percent per year up to 2014, with little prospect of a digital revenue replacement in what currently appears a dysfunctional market.

Music performers are not able to make anything from interactive streaming and webcast services because current law does not define such a platform. “It is clear that South African copyright law lags behind in the digital era,” the Copyright Review Commission laments.

But the commission does not lay all of the blame on structural deficiencies. It also cites a study which claims 3.6 million songs are downloaded illegally each month in South Africa, worth R36 million ($4.3 million) monthly and R432 million ($51.6 million) annually. 2011 digital music sales in South Africa were just $6.1 million, six percent of the total.

The commission recommends changing national law and the terms under which ISPs can act “to require ISPs to adopt a graduated response for repeat infringers culminating in the suspension of access services of an individual” who persistently downloads material illegally.

That would see South Africa join the UK, France and New Zealand amongst countries which are implementing or have implemented monitoring, warning and technical sanctions against offenders.

The state of the South African market suggests it is also one ripe for exploitation by services that are willing to play by more of the rules than existing local operators. Germany’s Simfy just launched in the country, and Spotify is also thought to be interested.

Now conjecture suggests it will plug its gap in South Africa, however.

Yoel Kenan, founder and CEO of African music licensing firm Africori, made the declaration at Mobile Entertainment Africa 2012 Conference in Cape Town (via MemeBurn), citing an Apple source (via MyBroadband).

Nearly 12 years after it first launched, iTunes Store finally went live in Brazil and 15 other Latin American countries, often plagued by difficulties in credit card processing, in December.

The expansion has been credited as one of the key reasons global digital music sales have lifted in recent quarters.

South African digital music services include Jamster, MTN Loaded, Music Station, Nokia Music and Vodafone, but just six percent of 2011 industry revenue was from digital.

German streaming service Simfy recently launched there.

In South Africa, Howzit MSN is carving out its celebrity channel in to a separate site, Zalebs, with its own editor and writing team.

The country’s MSN, as in many countries, was formed as a joint venture between radio broadcaster Kagiso Media and MSN. But Kagiso took over full running in 2010. Now Kagiso is making changes.

“It has enjoyed large growth as a channel on the Howzit MSN portal and reached a size where it deserved to become a web destination in its own right,” says Kagiso New Media editor Justin Zehmke, via the South African industry’s Digital Media & Marketing Association.

“We will actively be directing users to the site from the MSN portal, though Howzit MSN will also continue to carry Zalebs content.

“We are making a substantial investment into growing the brand because we believe it has a lot of potential in a market where users are hungry for local celebrity news.”

“Howzit” is a locally contracted form of the greeting “how is it?”.

Another publisher to have done same is the UK’s Mirror newspaper, which carved out its 3am celebrity gossip section to its own distinct 3am.co.uk website.

Naspers already has two investment in the local market, Abril and Compera nTime, and says has a good grasp of the market. Details in release.

It’s particularly popular in South Asia, but also South Africa. BuzzCity CEO KF Lai:

The bid: Airtel has bid for 51 percent stake in MTN, valuing the company at $37 billion. The company is willing to pay 165 rand (around $22) per share, and has secured $12 billion from banks to finance the deal. MTN is reportedly looking for 180 rand (around $24) per share. [Financial Times, via Reuters]
Valuation: The Airtel bid values MTN at $37 billion. As per a statement from MTN to the JSE, it was valued at around $41 billion, almost as much as Bharti Airtel, at $44 billion.
Shareholders: the largest shareholder is the Alpine Trust, comprising of MTN management and staff and a private family, holds 23 percent in MTN, the South African Government Pension Fund holds 13.5 percent stake. [CNBC]
Competition: Others are also looking to acquire MTN – there is another Indian major – Reliance Communications – as well as Vodafone (NYSE: VOD) and China Mobile.
Advisors: As per reports Airtel is being advised by Standard Chartered, Singtel by Goldman Sachs. Merrill Lynch and Deutsche Bank are advising MTN. [CNBC]

Airtel already has a license to operate in Sri Lanka, and operations in Seychelles, the islands of Jersey and Guernsey. The Sri Lankan operations are set to begin this year. The company has declined to comment on the details of the bid.

In today’s statement, Naspers said it “has prioritized the internet sector for expansion,” having achieved success in communications, social networking and community. It also confirmed it’s targeting central and eastern Europe — its acquisition of Polish ad-funded instant messenger Gadu-Gadu is ongong and Tradus is primarily based out of Poland and Switzerland. But Naspers said its current internet plays are mostly ad-funded and it wants to expand in to transactional income.