Despite the unprecedented headwinds that have pushed MultiChoice into the red, forcing it to review spending including on content, it is ruling out retrenchments.
The company’s woes continued into the half year to September with further earnings decline and loss of subscribers. It has so far saved R1.3bn by among other things reducing subsidies on decoders. It is targeting savings of R2.5bn.
“Our focus with cost-saving measures has been on finding efficiencies across the business,” CEO Calvo Mawela told the results presentation.
“Retrenchments are not part of the plan right now, and we’re committed to maintaining our existing team. We’re looking at a variety of ways to optimise our costs without impacting our people. If anything changes on that front, we’ll handle it openly and responsibly.”
The company said globally, the pay-TV industry is facing challenges from streaming services, the rise of short-form video on social media platforms and changing consumer preferences.
These pressure points are starting to worsen in the group’s core market in South Africa, and the situation is not much better for its rest-of-Africa business. At the same time, it is experiencing the most severe foreign exchange environment in the group’s history.
As part of the cost savings programme MultiChoice will review its spend on its content including dramas, sports and other entertainment shows . This year it terminated its sponsorship of the local Premier Soccer League.
“Our goal with the increased R2.5bn savings target is to operate smarter. So, yes, we’re reviewing spending, but we’re careful to protect the quality and diversity of our content. It’s about investing in what our customers love and optimising where we can. We’re working closely with the general entertainment and SuperSport team to make sure our approach keeps the viewing experience top-notch,” said Mawela.
In the period under review the subscriber base in South Africa declined 5% to 7.4-million, while the rest of Africa dropped 15% to 7.5-million, with the hardest-hit operations being Zambia and Nigeria.
MultiChoice is banking on the festive season to attract customers back to its platform. Subscription fees declined 13% to R20.2bn year on year. Group revenue for the half year was down 10% to R25.4bn due to subscriber weakness, the currency pressures impacting the rest-of-Africa business and the effects of a stronger rand.
MultiChoice is also pursuing partnerships to attract customers to its streaming platform Showmax and aggressively promoting DStv Stream — an online version of its satellite platform — along with new services such as betting and insurance.
Look, we know times are tough for a lot of people, and we’re committed to helping our customers where we can. Right now, reducing fees isn’t on the table because, like everyone, we’re also dealing with inflationary pressures
— CEO Calvo Mawela
Mawela ruled out price cuts. “Look, we know times are tough for a lot of people, and we’re committed to helping our customers where we can. Right now, reducing fees isn’t on the table because, like everyone, we’re also dealing with inflationary pressures, especially in regions in our rest-of-Africa segment. But we’ve rolled out some initiatives aimed at making things easier, like contracts with price locks, special offers and discounts here and there.”
Peter Takaendesa, head of equities at Mergence Investment, said MultiChoice has no choice but to push as much inflation as possible through to customers while aggressively cutting costs to protect the core business and the balance sheet.
“It is a very difficult situation to navigate as there are trade-offs between short-term viability and the long-term sustainability of the business. When looked at in this context, it is clear that Canal+ has come at the right time for existing MultiChoice shareholders.
“The operational turnaround is likely to take longer than most minority shareholders can stomach, so a long-term strategic shareholder with operational control of the business is more suited for the phase MultiChoice is currently facing.”
Canal+, which is MultiChoice’s largest shareholder at more than 45%, has offered R125 a share for the rest of the shares. Given the pressures on MultiChoice’s core business, Takaendesa said, it is unlikely that the R125 offer is at risk. Canal+ was likely taking a long-term view on the transaction and the long-stop date in April 2025 could be extended if some of the conditions for the deal were not satisfied by then, he said.
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