MultiChoice’s year to forget

MultiChoice CEO Calvo Mawela told the Sunday Times that the company can “still realise a lot of cost savings without retrenchments.”

This follows MultiChoice’s total revenue declining by 5% year over year and the company’s after-tax loss increasing from R2.9 billion to R4.1 billion.

To arrest the decline, the company has targeted R2 billion in savings by 2025 to improve its financials.

While these savings will be made across the board, Mawela said there will be a particular focus on “big ticket” lines like satellite leases, where contracts will soon be up for renegotiations.

Mawela also highlighted the company’s focus on building digital products that it can layer on top of its existing pay-TV base to increase revenue.

“Our strategy to grow these additional revenues is no longer only a vision, it is gaining real traction,” said Mawela.

The company’s insurance business, for example, grew by 19% to 3.3 million active policies over the past year, while its revenue increased by 35%.

Showmax is another major focus for MultiChoice, and Mawela told MyBroadband the service is on track to achieve $1 billion in revenues in five years.

Despite the growth of these products, MultiChoice continues to face major challenges — largely due to the company losing pay-TV subscribers in major markets like South Africa.

The company blamed the loss of subscribers on load-shedding in South Africa and the fact that its other African businesses suffered due to double-digit inflation and currency depreciation — especially in Nigeria, Angola, Kenya, and Zambia.

Peter Takaendesa, head of equities at Mergence Investment Managers, told the Sunday Times it has been “a year to forget” for MultiChoice.

He said MultiChoice’s new revenue streams were currently not enough to offset the structural and cyclical pressures on the traditional pay TV business.

Takaendesa said MultiChoice’s most important business was its South African pay-TV operation and it continued to face major challenges.

These were only compounded by the start-up losses it has incurred to fund Showmax.

“MultiChoice remains a high fixed cost business and any revenue shortfall amplifies the pressure on profits and cash returns to shareholders,” said Takaendesa.

However, Takaendesa said it is not all bad news for shareholders, as Canal+’s offer of R125 per share is now “the dominant factor” driving the share prices.

“We think Canal+ was fully aware of these operational headwinds facing the business,” he said.

Calvo Mawela, MultiChoice CEO

MultiChoice takeover challenges

While Canal+ and MultiChoice have reached an agreement to buy the latter out for approximately R35 billion, both companies face significant regulatory hurdles before the deal can be completed.

The takeover was confirmed in early June and now faces a plethora of approval processes across the Financial Surveillance Department, Competition Tribunal, JSE, Takeover Regulation Panel, and the Independent Communications Authority of South Africa (Icasa).

MultiChoice and Canal+ hope the processes will be finalised no later than 8 April 2025.

MyBroadband spoke with ICT policy legal expert Lisa Thornton, who said the deal’s success depends on its structure.

This includes limiting Canal+’s voting rights to 20%, which is required by the Electronic Communications Act (ECA) for broadcasting licensees.

For example, Canal+ currently owns approximately 45.2% of MultiChoice but has its voting rights limited to 20% to align with the ECA. This 20% vote must remain even as Canal+ increases its ownership of MultiChoice.

Another challenge will be meeting Icasa’s BBBEE rules, including the requirement that historically disadvantaged groups must own 30% of a licensee.

“This might entail establishing a South African entity to hold the licensees in question and a partnership with local black entities/persons,” said Thornton.

Patrice Motsepe is reportedly one of the businesspeople engaging with Canal+ to help it meet its BBBEE requirements.

Lastly, Thornton said MultiChoice and Canal+ would face a challenge from competition regulators, as Canal+’s vast resources and expertise could be perceived as increasing or cementing MultiChoice’s dominance in South Africa.

However, this could be weighed against the rise of online video streaming services like Netflix.

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MultiChoice’s year to forget