Lies, damned lies, and financial statements

A disconcerting trend of obfuscation and misdirection has taken root among some listed telecommunications and technology companies in South Africa.

As South Africa’s economic landscape has become tougher, the willingness to be up-front about performance seems to have diminished.

Financial statements have become littered with normalisations and other tricks to dress up otherwise dismal to mediocre numbers.

One prominent example that recently released its annual financial results is South African pay-TV giant MultiChoice.

The subterfuge began in 2019, shortly before Naspers spun off MultiChoice to list it separately on the Johannesburg Stock Exchange.

While MultiChoice was part of Naspers, the company would break down the subscriber numbers of DStv Premium, Compact, and its lower-end packages.

This breakdown made sense as it gave investors a good idea of the performance of MultiChoice’s big profit driver — DStv Premium.

However, there was a problem. From 2015, DStv Premium started to lose subscribers, which did not look good for the company.

When MultiChoice launched a campaign to entice investors ahead of its listing in 2019, it changed how it reported subscriber numbers to hide DStv Premium’s decline.

Instead of reporting the performance of individual packages, it combined them into three new categories:

• Premium — DStv Premium and Compact Plus
• Mid-market — DStv Compact and DStv Commercial
• Mass market — DStv Family, Access, and EasyView

By lumping DStv Premium and Compact Plus together in the confusingly named premium market segment, MultiChoice obfuscated the decline of DStv Premium.

Even when asked directly, MultiChoice refused to reveal its DStv Premium subscriber numbers, which faced an onslaught from Netflix.

However, when DStv Premium saw its subscribers increase in September 2022 while DStv Compact Plus performed poorly, MultiChoice was quick to try and tell investors the good news without disclosing the actual number.

High-profile sporting events, including the United Rugby Championship and 2022 FIFA World Cup, had seemingly bolstered DStv Premium subscriptions.

For two years, MultiChoice spun the narrative that its premium subscriber base was “gradually approaching a point of stability.”

However, with its premium market segment on a steady downward march, MultiChoice changed tack in its latest financial results.

In its annual results presentation, MultiChoice revealed that it shed 6% of its DStv Premium subscribers in South Africa in its 2022 and 2023 financial years, followed by 5% in 2024.

According to MultiChoice, this signals it is reducing DStv Premium’s the rate of decline.

To make the narrative fit the numbers, MultiChoice restated its March 2023 figures for DStv Premium to remove subscribers making use of its “Surprise and Delight” promotion.

The promotion offered certain customers lower fees to encourage them to stay subscribed.

In other words, the big DStv Premium rebound MultiChoice was trying to sell in 2022 may not have been returning sports-mad subscribers at all, but driven by its customer retention promotions.

Besides hiding its DStv Premium subscriber numbers, MultiChoice also changed how it reported active subscribers in 2020, making it challenging to directly compare to historical data.

In its 2019 financial results, MultiChoice announced that it was changing its metric from reporting active subscribers on the last day of its full-year or half-year reporting periods.

Instead, it would begin counting all customers with an active subscription within 90 days of the reporting date.

For the past four years, MultiChoice has given its market segment breakdowns in terms of 90-day active subscribers.

This year, it mysteriously switched back to reporting its active subscribers as at 31 March in its results presentation. You had to scroll to an appendix if you wanted the 90-day active numbers.

Interestingly, the percentage declines for the original metric looked a lot less than for 90-day actives.

When looking at active subscribers on 31 March 2024, DStv’s premium segment declined by 8% to 1 million, mid-market dropped by 9% to 2.2 million, and mass-market dipped by 2% to 4.4 million.

The 90-day active subscriber numbers tell an entirely different story.

While the premium segment still declined 8% to 1.2 million, the mid-market plummeted 15% to 2.3 million, and the mass-market dropped 5% to 5.1 million.