MultiChoice’s year from hell
Last year was filled with challenges for DStv owner MultiChoice, with the company reporting a loss of R911 million during the year’s second half and the loss of nearly half a million DStv subscribers in September 2023.
JP Morgan Chase & Co also downgraded the pay-TV company’s rating, resulting in its share price tanking in July 2023.
In June 2023, MultiChoice warned its shareholders about a significant profit decline ahead of the release of its results for the 2022/23 financial year, which ran from 1 April 2022 to 31 March 2023.
The results were published a few days later, with the company reporting a significant swing in profitability — from a R2.8 billion profit to a R2.9 billion after-tax loss.
The weakened rand had a major impact on the company’s performance. However, it also blamed load-shedding and other macroeconomic factors.
MultiChoice reported a 23% drop in trading profit in South Africa from R11 billion to R8.4 billion for the 2022/23 financial year.
Revenue from its South African business reported a 2% drop to just under R35 billion during the period.
“The South African consumer-facing business environment faced severe challenges during FY23,” said MultiChoice.
“At a time when consumers were already battling with interest rate hikes, elevated inflation and high levels of unemployment, load-shedding moved from being intermittent to becoming a permanent fixture in customers’ lives.”
The company published its interim results for the six months ended 30 September 2023 in November.
However, it issued a warning to shareholders a week prior, saying they should expect trading losses of between R1 billion and R1.3 billion.
Calvo Mawela, MultiChoice CEO
MultiChoice reported an after-tax loss of R911 million for the six months ended 30 Septemeber 2023.
The figure represented a significant swing from the R55 million after-tax profit it posted over the same period last year.
The company also reported a trading profit decline of over 17% — from R6.3 billion to R5.2 billion. Its trading losses increased from R279 million to R799 million over the same period.
MultiChoice also revealed that it had bled almost 500,000 subscribers between September 2022 and September 2023.
As of the end of September 2023, the pay-TV broadcaster’s 90-day active subscribers in its country of origin stood at 8.629 million — 486,000 less than the 9.115 million it had at the end of September 2022.
Just under a month after the publication of its annual results for 2022/23, brokerage firm JP Morgan Chase & Co downgraded MultiChoice’s rating from “neutral” to “underweight”, causing the share price to plummet.
An “underweight” rating means the firm predicts that MultiChoice will underperform based on the average total return of stocks in its coverage universe over the next six to 12 months.
JP Morgan Chase & Co’s reasoning behind its prediction was that it expects Multichoice to “throw considerably more money at Showmax than what the market expects”.
MultiChoice’s share price dropped nearly 13% in a single day following the downgrade. Before the announcement, its share price sat at R97.15 at the start of trade on Tuesday, 4 July 2023.
Its share price hasn’t returned to this level since its downgrade, with the highest price reached since being R92.92 on Tuesday, 16 January 2024.
Plans for 2024 — Showmax 2.0 and solar
MultiChoice partly blamed load-shedding for the poor performance reported in its results for 2023’s first half.
“The South African business had to contend with the effects of ongoing high levels of load-shedding as 43% of the days in the reporting period were impacted by stage 4–6 load-shedding,” it said.
MultiChoice Group CEO Calvo Mawela told MyBroadband that the company had embarked on a proof-of-concept to sell solar and battery energy storage products to combat these effects.
“We hope that will take off,” he said. “We should be able to get a sizeable number of our customers taking this, and then that helps us.”
The company is also banking on its revamped streaming service — Showmax 2.0 — to help it boost its performance in 2024.
Showmax 2.0
In a partnership with Comcast, MultiChoice will launch Showmax 2.0 on 12 February 2024. The revamped streaming service will offer up to full HD video and Dolby 5.1 surround sound.
Under the terms of the partnership, MultiChoice sold a 30% stake in Showmax to Comcast’s NBCUniversal and Sky for an undisclosed sum.
Comcast will then license its Peacock platform and content from NBCUniversal, Universal Pictures, Peacock, and Sky to MultiChoice.
It will also retain content from existing partners like HBO, BBC, and Warner Bros. Discovery.
Showmax 2.0 will offer mobile and football-focused plans, and with more than 450 million smartphone users and 250 million football fans in Africa, MultiChoice believes it could secure an untapped market.
“It is critical that we make our move now before others reorganise themselves and make a play for Africa, which is seen as the last remaining growth market,” said Mawela.
Mawela describes Showmax 2.0 as a “game-changer for consumers in Africa”, mainly due to its mobile and football-focused subscriptions.
“Both Showmax and MultiChoice have the right content agreements in place to give us runway to implement and execute on this strategy and to make Showmax the leading streaming platform on the continent,” he added.
The MultiChoice Group CEO also said the launch of SuperSportBet with KingMakers in South Africa and streamlining MultiChoice payments across the continent will help attract new signups and retain existing subscribers.
Mawela said MultiChoice’s customers should expect new local content in 2024.
“At a time when others are scaling back, we continue to double-down on investing in local content and changing the African narrative of storytelling,” he said.
“We have an exciting line-up for the year ahead, which includes some productions that are currently still under wraps, the return of popular reality shows like BigBrother, as well as Married at First Sight, Izingane Ses’thembu and Mnakwethu.”
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