{"id":558677,"date":"2024-09-04T07:01:15","date_gmt":"2024-09-04T05:01:15","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=558677"},"modified":"2024-09-04T07:05:37","modified_gmt":"2024-09-04T05:05:37","slug":"multichoice-misery","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/broadcasting\/558677-multichoice-misery.html","title":{"rendered":"MultiChoice misery"},"content":{"rendered":"\n

MultiChoice shareholders have had a dismal few years, with wild share price swings and a deteriorating financial performance.<\/p>\n\n\n\n

MultiChoice was unbundled from Naspers and was stable and listed on the Johannesburg Stock Exchange (JSE) on 27 February 2019.<\/p>\n\n\n\n

In its pre-listing statement, MultiChoice said it aimed to be a leading entertainment business that is profitable and highly cash-generative.<\/p>\n\n\n\n

It highlighted that it was one of the fastest-growing pay-TV operators globally, with 13.5 million subscribers across Africa.<\/p>\n\n\n\n

Before listing, MultiChoice’s annual financials showed that it added 1.5 million subscribers, generated revenue of R47.1 billion, and made a trading profit of R6.1 billion.<\/p>\n\n\n\n

“The strong leadership team is diverse, experienced and well-positioned to take the company forward,” it said.<\/p>\n\n\n\n

MultiChoice added that it was positioning the business for the future and technological changes through its online streaming services, including Showmax and DStv Now.<\/p>\n\n\n\n

“The combination of MultiChoice’s reach, Showmax’s cutting-edge internet television service, and Irdeto’s 360 Security suite provide a unique offering,” it said.<\/p>\n\n\n\n

After the unbundling, MultiChoice had limited leverage, providing it with the necessary financial flexibility to pursue growth opportunities in Africa.<\/p>\n\n\n\n

Africa is one of the fastest-growing continents in terms of GDP and population. Its middle class is rapidly expanding, and video entertainment penetration is still relatively low.<\/p>\n\n\n\n

It sounded like a fantastic investment opportunity, considering MultiChoice’s strong position in the market, which includes a sports monopoly and dominant DStv entertainment platform.<\/p>\n\n\n\n

However, it did not live up to its promise. The company’s latest financial results were a disaster and showed that the company was in deep distress.<\/p>\n\n\n\n

MultiChoice’s financial results for the year ended 31 March 2024 revealed it suffered a R4.1 billion loss and became technically insolvent.<\/p>\n\n\n\n

Its assets declined to R43.9 billion, while liabilities increased to around R45 billion. This leaves it with a negative equity of R1.07 billion, which means it is technically insolvent.<\/p>\n\n\n\n

Even more concerning was that MultiChoice suffered a 9% decline in active subscribers due to a 13% decline in the Rest of Africa business and a 5% decline in South Africa.<\/p>\n\n\n\n

The subscriber decline, big loss, and technical insolvency starkly contrasted its pre-listing promise of strong growth and being profitable and highly cash generative.<\/p>\n\n\n\n

MyBroadband delved deeper into the company’s operational and financial data to show what went wrong.<\/p>\n\n\n\n

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Revenue and profit<\/h2>\n\n\n\n

MultiChoice repeatedly promised investors strong growth, considering the tremendous potential across Africa. However, this did not happen.<\/p>\n\n\n\n

Since MultiChoice was listed on the JSE in February 2019, it has only delivered an average annual revenue growth of 2.9%. Revenue fell by 5.4% over the last financial year.<\/p>\n\n\n\n

Net profits were even worse. Since 2018, Multichoice has reported three periods with net losses.<\/p>\n\n\n\n

Over the last two years, MultiChoice has reported two back-to-back losses. It suffered a net loss of R3.5 billion in 2023 and a loss of R4 billion in 2024.<\/p>\n\n\n\n

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MultiChoice South Africa<\/h2>\n\n\n\n

South Africa is MultiChoice’s home country and has been the company’s revenue and profit driver since its inception.<\/p>\n\n\n\n

MultiChoice’s South Africa segment generates most revenue from its dominant DStv satellite and streaming products.<\/p>\n\n\n\n

Although DStv achieved steady growth over the years, increased competition from streaming services like Netflix halted this growth.<\/p>\n\n\n\n

DStv recorded three consecutive periods of declining subscriber numbers, which put top-line pressure on the company.<\/p>\n\n\n\n

In 2024, the most recent period, subscriber numbers in South Africa declined by 5%. It struggled to attract new customers to its DStv platform.<\/p>\n\n\n\n

The effect of the decline in DStv subscribers was clearly seen in MultiChoice South Africa’s finances.<\/p>\n\n\n\n

It grew revenue until 2022. However, since then, MultiChoice South Africa experienced two periods of declining revenue.<\/p>\n\n\n\n

The pain did not stop at revenue. The South African segment’s profits experienced a downward trend in conjunction with the declining revenue.<\/p>\n\n\n\n

MultiChoice South Africa’s trading profits declined from R10.4 billion in 2018 to R8.8 billion in 2024.<\/p>\n\n\n\n

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The data further showed a shift in DStv’s subscriber mix, with South Africans opting for more affordable low-end packages.<\/p>\n\n\n\n

This shift is seen in MultiChoice South Africa’s average revenue per user (ARPU), which has been declining for years.<\/p>\n\n\n\n

This segment’s ARPU has fallen dramatically since 2018. There was not a single reporting period during which ARPU increased.<\/p>\n\n\n\n

This is particularly noteworthy as MultiChoice has increased the price of its decoder-based DStv packages every year. Despite the annual price increases, ARPU still declined.<\/p>\n\n\n\n

This can be expected as the South African economy has stagnated, and households started struggling financially.<\/p>\n\n\n\n

However, the added problem was that high-end DStv Premium subscribers were dumping the service for Netflix and other online streaming services.<\/p>\n\n\n\n

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MultiChoice Africa<\/h2>\n\n\n\n

MultiChoice Africa, which is essentially a Rest of Africa segment, has performed well since the company was listed in 2019.<\/p>\n\n\n\n

The segment experienced strong subscriber growth from 2018 to 2023, with an average annual growth rate of 9.5%.<\/p>\n\n\n\n

However, in 2024, the segment experienced its first subscriber decline since MultiChoice was listed on the JSE.<\/p>\n\n\n\n

The impact of the subscriber decrease can clearly be seen in the Africa segment’s revenue figures.<\/p>\n\n\n\n

Similar to the subscriber numbers, MultiChoice Africa did not experience a single period of decline until 2024. However, revenue dropped from R22.6 billion to R19.7 billion over the last year.<\/p>\n\n\n\n

MultiChoice Africa has significantly improved profits since 2018, when it recorded a trading loss of R4.6 billion.<\/p>\n\n\n\n

Despite the drop in subscribers and revenue, the segment improved on its losses until it reported a trading profit in 2023.<\/p>\n\n\n\n

Equally impressive was that MultiChoice Africa increased the average revenue per user during its growth phase.<\/p>\n\n\n\n

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KingMakers sports betting<\/h2>\n\n\n\n

MultiChoice was searching for new revenue streams and decided to invest in the Nigerian sports betting company KingMakers, formerly known as BetKing.<\/p>\n\n\n\n

It purchased a 20% interest in 2020 for R1.9 billion, followed by a further 29% investment in 2021 for around R4 billion.<\/p>\n\n\n\n

MultiChoice spent a combined R5.9 billion to acquire a 49.23% stake in KingMakers to diversify its portfolio.<\/p>\n\n\n\n

However, it did not work out as planned. KingMakers is losing money hand over fist, forcing MultiChoice to do significant impairments.<\/p>\n\n\n\n

KingMakers’ carrying value in MultiChoice’s most recent statements was R4.2 billion, significantly less than the R5.9 billion it invested in the business.<\/p>\n\n\n\n

KingMakers initially reported strong revenue growth. However, in the most recent annual report, its revenue fell from $198 million to $147 million.<\/p>\n\n\n\n

In addition, KingMakers has been raking in losses, extending their loss streak to three consecutive years.<\/p>\n\n\n\n

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Showmax<\/h2>\n\n\n\n

With the decline in DStv subscribers and revenue, MultiChoice is betting the farm on its streaming platform, Showmax.<\/p>\n\n\n\n

It partnered with NBCUniversal to launch Showmax 2.0. It offers better technology and a quality catalogue of entertainment.<\/p>\n\n\n\n

MultiChoice wants to become the premium streaming service in Africa and capture a large chunk of the market.<\/p>\n\n\n\n

Through Showmax, it expects to grow its total subscriber base to 50 million users by 2028. This is highly optimistic.<\/p>\n\n\n\n

To put this into perspective, MultiChoice’s overall subscriber base, including all DStv and Showmax subscribers, stood at only 17.3 million at the end of 2023.<\/p>\n\n\n\n

Even more striking was that MultiChoice’s total subscriber base fell to 15.7 million in 2024. Therefore, it was losing subscribers.<\/p>\n\n\n\n

It would first have to stem the decline in subscribers before it can start to grow towards its 50 million goal.<\/p>\n\n\n\n

Showmax’s track record has not been good. To date, the big growth promised by MultiChoice executives has not materialised.<\/p>\n\n\n\n

Former MultiChoice executive Yolisa Phahle said Showmax is set to make R18 billion in net revenue in 2028.<\/p>\n\n\n\n

MultiChoice is miles off from this target. Even more concerning is that it has been struggling to grow revenue in recent months.<\/p>\n\n\n\n

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Share price volatility<\/h2>\n\n\n\n

MultiChoice’s poor performance is evident in its share price, which has declined by 36% since it was listed in 2019 to a low of R63 a share in 2023.<\/p>\n\n\n\n

Its only saving grace was Canal+’s offer to buy the company for R125 per share.<\/p>\n\n\n\n

Simply put, the company did not live up to its pre-listing promises. The only reason it is not trading at half of its listing price is the Canal+ offer.<\/p>\n\n\n\n

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MultiChoice shareholders have had a dismal few years, with wild share price swings and a deteriorating financial performance.<\/p>\n","protected":false},"author":341111,"featured_media":558689,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24],"tags":[85,83067,475,32140],"class_list":["post-558677","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-broadcasting","tag-dstv","tag-kingmakers","tag-multichoice","tag-showmax"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/558677"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/341111"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=558677"}],"version-history":[{"count":7,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/558677\/revisions"}],"predecessor-version":[{"id":558777,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/558677\/revisions\/558777"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/558689"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=558677"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=558677"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=558677"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}