Pay-TV provider MultiChoice Africa Holdings (MAH) is in talks with Malawi’s government after the company terminated satellite services over a tariff increase dispute.
MAH, which houses the MultiChoice Group’s assets in Sub-Saharan Africa, announced it had terminated its satellite offering in Malawi with immediate effect after the high court in Lilongwe issued an injunction prohibiting an adjustment of DStv tariffs. Some consumers who have not yet paid their monthly subscriptions have already been switched off while services to those who have paid will be cut off on September 10.
MAH said the high court order, affecting MultiChoice Malawi, a wholly owned local franchise, “carries with it grave consequences for the directors and management of MultiChoice Malawi, including imprisonment”.
Keabetswe Modimoeng, group executive for corporate affairs & stakeholder relations at MultiChoice Africa, said the Malawian government had reached out to the company for a discussion on the impasse.
“We subject ourselves to cordial engagements with the government. We are engaging them with open minds to see where those discussions will lead us,” he said.
“Given the advent and increasing competition from OTTs [over-the-top services] who are not subject to any regulation, we cannot function in a hostile regulatory environment which affects our ability to compete with these OTT players and which threatens our commercial sustainability.”
Modimoeng said the Malawi Communications Regulatory Authority (Macra) did not have jurisdiction to regulate price increases imposed by MultiChoice Africa Holdings as these are driven by increased costs, currency devaluations and high inflation.
Multichoice has increased the charge for Compact in Malawi from K27,500 (R479) to K33,000, (R574); for Compact Plus from K43,000 (R749) to k51,000 (R888); and for Premium from K67,000 (R1 167) to K79,000 (R1 376).
Once a regulator behaves in an unwarranted manner, as Macra has conducted itself, it leaves us with no option but to withdraw services
— Keabetswe Modimoeng, group executive for corporate affairs & stakeholder relations at MultiChoice Africa
In Malawi, MultiChoice's content is accessible through two separate subscription TV businesses.
GOtv, a terrestrial TV platform, is operated by MultiChoice Malawi, which has a broadcasting licence for the service. The other is the satellite offering — DStv — provided directly by MultiChoice Africa, but there is no requirement for a licence to beam this to subscribers.
MultiChoice Malawi entered into a management services contract with MultiChoice Africa Holdings to collect monthly fees for the DStv service, and to help with customer services and marketing.
Modimoeng said the dispute was not about the increase in DStv subscription fees but that the regulator wanted to approve tariffs MultiChoice charges for the satellite service just as it does with the GOtv terrestrial service.
“There is nothing in law that says MultiChoice Africa should be applying for price increase approvals in Malawi,” he said.
Although he would not disclose the number of DStv subscribers who would be affected by the switch-off, Modimoeng said every market that MultiChoice operated in was important and was afforded the same level of respect.
“We operate in about 50 countries in the African continent. We respect local laws everywhere. Whenever there are disagreements, we do not believe in resolving issues in a hostile or confrontational manner. But once a regulator behaves in an unwarranted manner, as Macra has conducted itself, it leaves us with no option but to withdraw services.
“The risk of continuing in such a market marred by regulatory uncertainty is something we cannot reconcile ourselves with because it effectively means our investment is not secured. We have no recourse and no knowledge of what the future holds in such an environment.”
At the end of March, MultiChoice had 14.2-million subscribers on the continent and 9.3-million in South Africa. It reported a 26% increase in revenue from the rest-of-Africa business to R22.6bn for the year to March. Africa operations now contribute 38% to overall group revenues of R59.1bn.
The broadcaster has had a number of run-ins with regulators and tax authorities in Africa. It recently settled a tax dispute with the authorities in Nigeria.
Philip Short, a senior equity analyst at Flagship Asset Management, said given pricing pressures that include rising content costs, sporting distribution rights, salaries, and other costs of operations, there is a need to raise prices. “The extent [of the increase] can be debated, but you can’t have the regulator barring you from raising prices. I think the messaging is important from MultiChoice, and it’s fortunate that Malawi is relatively small in their lives. If they allowed themselves to be bullied by the regulator, I think the odds are raised that another country’s regulator interferes.”
He said there is greater pressure on companies, especially South African companies, in the current macro environment. “Companies are pulling levers to cut costs. If you are operating in areas where you have added pressures, such as a regulator interfering in your operations, or you are receiving irrational fines, there comes a point where it’s better to close up shop.”
Vodacom and MTN have also had tax and regulatory related disputes with authorities in a number of African countries.
Andre Wills, director at Africa Analysis, said the cumulative impact of these disputes “does lead to an increased regulatory risk for any service provider operating or seeking to operate in a country”.
“Increased regulatory risk does serve to dissuade investment in that country. Thus, if the regulatory disputes are not justified, or are unfounded, then the regulatory risk puts a dampener on the ICT investment climate for that country,” he said.
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