MultiChoice’s hidden DStv Premium information – What you should know

MultiChoice has released its financial results for the year ended 31 March 2020, which shows that it increased its subscriber base to 19.5 million and grew revenue by 3% to R51.4 billion.

The company increased its core headline earnings to R2.5 billion and grew its consolidated free cash flow by 59% to R5.2 billion.

This was driven mainly by an improvement in the trading results from the Rest of Africa region and a focus on cost containment and a reduction in working capital.

MultiChoice further reported that its South African business saw a 6.6% year-on-year subscriber growth.

It added that the impact of the coronavirus pandemic in South Africa and associated lockdown saw an uplift in subscribers towards the end of March.

MultiChoice’s South African business increased revenue by 1% to R34.2 billion. This muted growth, the company said, was a result of its decision not to increase prices on the Premium bouquet.

Trading profit in South Africa increased by only 1% to R10.3 billion due to modest revenue growth and the cost impact of broadcasting three major sport events in the reporting period.

A strong growth area for MultiChoice was Connected Video, with both DStv Now and Showmax showing an increase in subscribers.

“Showmax gained solid traction this year following the launch of a mobile-only offering, improved marketing, and further enhancements to the user interface and the content slate,” MultiChoice said.

DStv subscriber information

MultiChoice reported that the number of DStv subscribers in South Africa increased by 6% over the past year – from 8.0 million to 8.4 million.

It said its “Premium” subscribers declined by 4% year-on-year – from 1.6 million in 2019 to 1.5 million to 2020.

What is explained in the fine print of its financial results is that this “Premium” label does not represent the number of DStv Premium subscribers.

Instead, “Premium” includes both DStv Premium and DStv Compact Plus bouquets, which represents a much higher subscriber number than actual DStv Premium subscribers.

During the reporting period, MultiChoice launched an initiative to drive upgrades from the Compact bouquet to Compact Plus.

This means the “Premium” subscriber base has been bolstered by a higher number of Compact Plus subscribers, further obfuscating the loss of DStv Premium subscribers.

The company admitted that it has been impacted by downgrades due to scheduling disruptions – like live sport – and consumer pressure.

In an interview on Business Day TV, MultiChoice CEO Calvo Mawela said they have seen a slight decline in DStv Premium bouquet subscribers.

However, the true impact on the DStv Premium bouquet is hidden because of the way MultiChoice has changed its reporting.

It should be noted that this reporting change was implemented when the company released its maiden results last year and is therefore not new.

The images below show how MultiChoice currently reports its DStv subscriber numbers, with the fine print in grey below the image.

Change in subscriber number reporting

Another thing which MultiChoice stated in its fine print is that it changed the way it reports subscriber numbers.

“Our primary metric for reporting subscribers has changed effective 1 April 2019 from active at the reporting date to 90-day active,” MultiChoice said.

This means that instead of stating how many DStv subscribers it had on 31 March, MultiChoice now reports how many subscribers it had between 1 January and 31 March.

The impact of applying a 90-day active reporting standard on the number of DStv subscribers is significant.

When applying this new reporting standard to MultiChoice’s 2019 figures, it increases the number of DStv subscribers in South Africa from 7.4 million to 8 million.

When looking at the total subscriber base, it increases the number of subscribers in 2019 from 15.1 million to 18.6 million.

The image below shows the impact of the change in reporting on MultiChoice’s subscriber numbers.

MultiChoice explains

MultiChoice chief financial officer Tim Jacobs told MyBroadband that when they listed the company in February 2019, they were faced with a choice on reporting DStv Premium subscribers.

“We had to make a choice between giving more information than what people were getting under the Naspers umbrella, but at the same time recognising that this is really competitive information and we don’t want to get to that level of granularity,” he said.

He said they decided to stop providing DStv Premium bouquet subscriber numbers following the listing.

“Generally speaking, what we tried to do was to give additional metrics such as the average ARPU and price increase within that bucket of bouquets,” he said.

He said they have received good responses from their investor base and that the level of disclosure is significantly more than it was in the past.

He did, however, admit that there are times when there is frustration from investors in not being able to drill down onto a specific bucket, like DStv Premium subscriber numbers.

MultiChoice’s senior manager for corporate communications, Benedict Maaga dismissed speculation that the company is proactively hiding DStv Premium subscriber numbers because of its decline.

“Hiding information certainly wouldn’t help us or our investors and shareholders. As Tim said, this model has been accepted as a better model than what we had before,” he said.

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MultiChoice’s hidden DStv Premium information – What you should know