Having bled a fifth of its subscribers in calendar year 2024 and facing a takeover that appears inevitable to some, 2025 will be a make-or-break year for MultiChoice, Africa’s biggest pay-TV business.
The group is fighting headwinds that have battered the business.
These range from a cost-of-living crisis that has seen households cut their entertainment budgets, to those same inflationary pressures pushing up operating costs across its 50 markets and shifting consumer preferences for entertainment towards alternatives such as gaming and social media.
The company has gone from having more than 23-million subscribers to 19.3-million in less than two years.
MultiChoice boss Calvo Mawela recently told Business Day that these were the worst conditions the business had seen in 40 years.
In those years, getting to a place where the group now has a presence in 50 markets on the continent, MultiChoice’s main achievement has been cultivating a customer base of about 20-million households that pay for film and television each month. In a world where free content is so readily available, paying customers are a valuable asset.
South Africans spend more than four hours a day watching TV, nearly 25% of their waking time. That’s the second highest in the world, behind only the US, according to a 2024 study by Electronics Hub.
The group now finds itself at an inflection point. How does it keep customers paying for entertainment when so many other priorities are fighting for what little they have in their pockets?
Second, if the draw of assets such as SuperSport continues to keep customers loyal, what form does the offering take in future, satellite or streaming?
For now, MultiChoice is betting its future on online streaming and video-on-demand services becoming its bread and butter, and has poured R3bn into its gamble.
A year ago, the group unveiled an updated version of Showmax, which is available in 44 countries. The new platform is underpinned by technology from US giant NBCUniversal.
Deep-pocketed international streaming giants such as Netflix, which see Africa as their next frontier for growth, are the biggest competition, but MultiChoice appears to have an edge, using its platform to grow a large local content library of more than 80,000 hours.
US giant Netflix told Business Day in December that it had spent R4bn on SA content since 2021.
MultiChoice is also working at becoming a one-stop shop for streaming, having signed deals with the likes of HBO, Paramount and NBC, who now use Showmax as a portal to offer their streaming content in Africa.
In addition to Showmax, the group has an online version of its broadcast service called DStv Stream, which saw a 71% year-on-year revenue increase for the half year to September 2024, and the release of numerous platform improvements.
According to the company, there was more than 430-million hours of live entertainment on DStv Stream in 2024.
While losing customers is a big concern, the biggest question mark around the DStv operator’s future is ownership.
MultiChoice is the subject of a takeover bid by French broadcaster Canal+. The bid has certainly done a lot to keep the group’s share price afloat at R107, trading well above the R63 trough reached in November 2023.
But share price movements and offers aside, the unknown is whether Canal+ will be allowed to take over the JSE-listed entertainment group. This is because the transaction faces regulatory hurdles and resistance from internal stakeholders because SA’s regulations — under the Independent Communication Authority of SA (Icasa) and MultiChoice’s own memorandum of understanding — limit foreign voting rights to 20%.
Business Day understands that a number of investors already cashed out their MultiChoice holdings earlier in the year when the stock was in the R105-R119 range, above what some considered fair value. Without certainty on whether the deal will go through, some took advantage of the rally caused by the offer, locking in their gains.
While Icasa is yet to make a determination, the takeover regulation panel has made a call, shedding light on how some are interpreting the legislation.
The panel instructed Canal+ to issue a mandatory offer, following the argument from the French company that it was not obliged to do so as its 35% ownership (at the time) did not grant it voting rights.
The panel said the restriction on voting “does not apply when votes are to be cast on other [non-licensee] matters”. In other words, Canal+ had voting rights up to 35%, insofar as a matter does not have to do with MultiChoice SA, which is the holder of the group’s broadcast licence in the country.
Ultimately, Icasa as the broadcast regulator, will have the final say. This may only happen after Canal+’s mandatory offer runs its course in April.
Canal+ has been aggressively buying up MultiChoice shares for four years after it started building its stake with an initial purchase of 6.5% in October 2020. At the beginning of February 2024, the Paris-based company made an offer to buy the rest of the company at R105 a share, or just more than R31bn.
The DStv owner snubbed the offer as too low for the business and its prospects, even though it is at the top end of the target price range that analysts and brokers have for the stock. Canal+ raised its offer to R125 a share on March 5.
A day later, Canal+’s stake had grown to 35.01%, triggering a mandatory offer according to rules set by the takeover regulation panel.
Canal+ has since increased its holding to 45.2%.
Like mobile operators, MultiChoice is also investing in ventures that it hopes will make its core offering more attractive.
One such venture is Moment, a fintech platform now handling payments for the group’s various platforms. In the six months to end-September, Moment ramped up total payment volumes to over $240m, compared with less than $1m in the previous comparable period. Over 95% of this volume was driven by payment flows from MultiChoice SA and Showmax SA. The service is now available in 40 markets.
The group is also seeking to capitalise on online betting growth in Africa.
A year ago, MultiChoice officially entered SA’s sports betting market with a new platform, using its tie-in with SuperSport to stand out in an already crowded, but growing, market.
The group, which uses sport as a big drawcard to its DStv and Showmax platforms, is employing the same strategy to boost the betting business through programming and other efforts that increase awareness of betting, helping to push up users for SuperSportBet.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.