MultiChoice Group, a leading entertainment firm in South Africa, is reassessing its business strategy for African operations in response to declining revenues and a reduction in subscriber numbers. The company’s latest annual report (2023) highlights a challenging environment marked by depreciating currencies, high fuel prices, and soaring inflation, prompting households to prioritise basic needs over entertainment.
Compounding these issues is the rise of online piracy, with illegal streaming of football matches significantly impacting the company’s revenue. The loss-making group, which operates in 49 markets across the continent, acknowledged the need to revise its pricing and investment strategies in a bid to regain its status as the preferred entertainment provider in Africa.
MultiChoice emphasised the importance of leveraging its strengths in local content and sports. The company recognises the necessity of carefully considering pricing and broadband affordability in the streaming market. “We know that we need to play to our strengths – which is local content and sport – and we realise that when it comes to streaming, we need to carefully consider pricing and broadband affordability,” the company stated in its annual report. “We also understand that we need to double-down where others retreat.”
The group has faced significant financial challenges, including a net loss of R4.14 billion ($227.27 million) for the year ended 31 March 2024, up from R2.92 billion ($160.29 million) the previous year. The company also reported a nine percent drop in active subscriber numbers, with a 13 percent decline in the Rest of Africa segment and a five percent decline in South Africa. This decline is attributed to mass-market customers in countries such as Nigeria opting to focus on essential needs amidst economic pressures.
To address these challenges, MultiChoice aims to return its Rest of Africa segment to profitability, focusing on sustainable, standalone free cash flow generation. The company plans to pursue organic initiatives, strategic partnerships, and investments in underlying businesses. The Rest of Africa represents a significant market with an estimated 39 million addressable households, though it is characterised by volatile inflation rates and exchange rates.
“Returning our Rest of Africa segment to profitability, cash flow breakeven, full funding breakeven, and normalised margins remains a key point of focus for shareholders and lenders,” the company noted. “We aim for price increases at or slightly below inflation but seek to accommodate specific in-market dynamics, such as pressure on affordability, when necessary.”
The macro-economic conditions in Sub-Saharan Africa in 2023 were challenging, with various global and country-specific factors affecting the group’s major markets. A strong US dollar, elevated oil prices, and rising inflation in core markets have significantly impacted consumers, with basic staples seeing considerable price increases. These economic pressures have affected the company’s mid-market segment, which declined by three percent in the year ended 31 March 2024.
In a strategic move to sustain its operations, MultiChoice entered into a deal on 18 June to sell its insurance business to Sanlam Ltd, a diversified financial services company based in South Africa. Under the agreement, Sanlam will pay an upfront cash consideration of R1.2 billion ($65.87 million) for MultiChoice’s 60 percent stake, with a potential performance-based earn-out of up to R1.5 billion ($82.34 million) contingent on gross written premium for the financial year ending 31 December 2026.
As MultiChoice navigates these challenging times, its focus remains on returning to profitability and reclaiming its position as a leading entertainment provider across the African continent.
