MultiChoice misery – MyBroadband
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MultiChoice shareholders have had a dismal few years, with wild share price swings and a deteriorating financial performance.
MultiChoice was unbundled from Naspers and was stable and listed on the Johannesburg Stock Exchange (JSE) on 27 February 2019.
In its pre-listing statement, MultiChoice said it aimed to be a leading entertainment business that is profitable and highly cash-generative.
It highlighted that it was one of the fastest-growing pay-TV operators globally, with 13.5 million subscribers across Africa.
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.
“The strong leadership team is diverse, experienced and well-positioned to take the company forward,” it said.
MultiChoice added that it was positioning the business for the future and technological changes through its online streaming services, including Showmax and DStv Now.
“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.
After the unbundling, MultiChoice had limited leverage, providing it with the necessary financial flexibility to pursue growth opportunities in Africa.
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.
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.
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.
MultiChoice’s financial results for the year ended 31 March 2024 revealed it suffered a R4.1 billion loss and became technically insolvent.
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.
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.
The subscriber decline, big loss, and technical insolvency starkly contrasted its pre-listing promise of strong growth and being profitable and highly cash generative.
MyBroadband delved deeper into the company’s operational and financial data to show what went wrong.
Revenue and profit
MultiChoice repeatedly promised investors strong growth, considering the tremendous potential across Africa. However, this did not happen.
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.
Net profits were even worse. Since 2018, Multichoice has reported three periods with net losses.
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.
MultiChoice South Africa
South Africa is MultiChoice’s home country and has been the company’s revenue and profit driver since its inception.
MultiChoice’s South Africa segment generates most revenue from its dominant DStv satellite and streaming products.
Although DStv achieved steady growth over the years, increased competition from streaming services like Netflix halted this growth.
DStv recorded three consecutive periods of declining subscriber numbers, which put top-line pressure on the company.
In 2024, the most recent period, subscriber numbers in South Africa declined by 5%. It struggled to attract new customers to its DStv platform.
The effect of the decline in DStv subscribers was clearly seen in MultiChoice South Africa’s finances.
It grew revenue until 2022. However, since then, MultiChoice South Africa experienced two periods of declining revenue.
The pain did not stop at revenue. The South African segment’s profits experienced a downward trend in conjunction with the declining revenue.
MultiChoice South Africa’s trading profits declined from R10.4 billion in 2018 to R8.8 billion in 2024.
The data further showed a shift in DStv’s subscriber mix, with South Africans opting for more affordable low-end packages.
This shift is seen in MultiChoice South Africa’s average revenue per user (ARPU), which has been declining for years.
This segment’s ARPU has fallen dramatically since 2018. There was not a single reporting period during which ARPU increased.
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.
This can be expected as the South African economy has stagnated, and households started struggling financially.
However, the added problem was that high-end DStv Premium subscribers were dumping the service for Netflix and other online streaming services.
MultiChoice Africa
MultiChoice Africa, which is essentially a Rest of Africa segment, has performed well since the company was listed in 2019.
The segment experienced strong subscriber growth from 2018 to 2023, with an average annual growth rate of 9.5%.
However, in 2024, the segment experienced its first subscriber decline since MultiChoice was listed on the JSE.
The impact of the subscriber decrease can clearly be seen in the Africa segment’s revenue figures.
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.
MultiChoice Africa has significantly improved profits since 2018, when it recorded a trading loss of R4.6 billion.
Despite the drop in subscribers and revenue, the segment improved on its losses until it reported a trading profit in 2023.
Equally impressive was that MultiChoice Africa increased the average revenue per user during its growth phase.
KingMakers sports betting
MultiChoice was searching for new revenue streams and decided to invest in the Nigerian sports betting company KingMakers, formerly known as BetKing.
It purchased a 20% interest in 2020 for R1.9 billion, followed by a further 29% investment in 2021 for around R4 billion.
MultiChoice spent a combined R5.9 billion to acquire a 49.23% stake in KingMakers to diversify its portfolio.
However, it did not work out as planned. KingMakers is losing money hand over fist, forcing MultiChoice to do significant impairments.
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.
KingMakers initially reported strong revenue growth. However, in the most recent annual report, its revenue fell from $198 million to $147 million.
In addition, KingMakers has been raking in losses, extending their loss streak to three consecutive years.
Showmax
With the decline in DStv subscribers and revenue, MultiChoice is betting the farm on its streaming platform, Showmax.
It partnered with NBCUniversal to launch Showmax 2.0. It offers better technology and a quality catalogue of entertainment.
MultiChoice wants to become the premium streaming service in Africa and capture a large chunk of the market.
Through Showmax, it expects to grow its total subscriber base to 50 million users by 2028. This is highly optimistic.
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.
Even more striking was that MultiChoice’s total subscriber base fell to 15.7 million in 2024. Therefore, it was losing subscribers.
It would first have to stem the decline in subscribers before it can start to grow towards its 50 million goal.
Showmax’s track record has not been good. To date, the big growth promised by MultiChoice executives has not materialised.
Former MultiChoice executive Yolisa Phahle said Showmax is set to make R18 billion in net revenue in 2028.
MultiChoice is miles off from this target. Even more concerning is that it has been struggling to grow revenue in recent months.
Share price volatility
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.
Its only saving grace was Canal+’s offer to buy the company for R125 per share.
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.
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