South African consumers and their African counterparts are discontinuing their DStv subscriptions in favor of more cost-effective streaming services.
MultiChoice’s financial report for the fiscal year concluded
on March 31, 2024, revealed a concerning decline in its subscriber base.
Specifically, the company experienced a 9% reduction in the number of active
subscribers over the past year.
The decrease In active subscribers was primarily attributed
to a 13% reduction in the Rest of Africa operations, as a significant number of
mass-market clients discontinued their DStv subscriptions.
MultiChoice attributed the decline to challenging economic
circumstances, where households prioritize essential necessities over
entertainment.
In South Africa, DStv experienced a 5% decrease in the
number of subscribers. The company attributed this decline to challenging
market conditions.
“The South African economy continues to endure severe
economic pressure, with consumers under financial distress due to high
inflation and interest rates,” it said.
“Consistent load-shedding through the year has created an
environment where customers without backup power were reluctant to subscribe.”
Households were hesitant to invest in DStv due to concerns
about the reliability of electricity supply and their ability to access the
service during power outages.
“The net effect was increased pressure on subscriber
numbers, activity and viewership, with active subscribers down 5% to 7.6
million at year-end,” it said.
The report Indicated an 8% decrease in both the Premium and
Compact Plus DStv packages. While the Premium bouquets demonstrated greater
stability, the Compact Plus offering experienced a more significant decline.
This was the result of concentrated retention initiatives
and the evolution of the Premium subscriber base toward a more consistent and
dedicated group of customers.
The Compact base, similar to the Compact Plus base, was
significantly impacted by the macroeconomic challenges. Consequently, it
experienced a decline of 9%.
The mass market segment, which has historically exhibited
robust growth, experienced a 2% decline as a result of competitive pressures
within the Family category.
In the current economic climate, many South African and
African households are finding that the cost of DStv is no longer a feasible
expense.
There are numerous cost-effective entertainment options
available, such as Netflix, YouTube, Showmax, and Disney+.
With the rise in broadband penetration and reduced data
costs, South African consumers are transitioning from DStv to streaming
services.
The attached chart, provided by The Outlier, illustrates the decrease in DStv subscribers during the previous fiscal year.
The financial results indicate a reduction in the number of subscribers.
The reduction in DStv subscribers, who are the primary
source of revenue for the company, had a negative impact on MultiChoice’s
financial performance.
The company's recent financial report indicates a
substantial loss of R4.1 billion, resulting in a state of technical insolvency.
A combination of adverse foreign exchange movements and a
reduced subscriber base led to a 5% decrease in the group’s overall revenue,
which amounted to R56 billion.
Subscriber trends and foreign exchange pressures negatively
impacted group trading profit, resulting in a 21% decline to R7.9 billion.
MultiChoice’s annual financial performance experienced a
significant downturn, with a notable increase in its loss from R2.9 billion to
R4.1 billion, representing a concerning 42% decline. This marks the company’s
weakest financial performance on record.
It Is particularly concerning that the DStv owner is now
technically insolvent. Total assets have decreased from R47.6 billion to R43.9
billion, while liabilities have increased to approximately R45 billion.
The financial standing of MultiChoice is currently in a
state of negative equity, amounting to R1.068 billion. This situation indicates
that the company is technically insolvent.
In essence, MultiChoice is facing a severe financial
predicament, as its current assets are insufficient to cover all of its
outstanding liabilities. This situation poses significant challenges for the
company’s long-term viability and stability.
MultiChoice’s recent financial performance, as characterized
by Wayne McCurrie of FNB Wealth and Investments, has been profoundly
disappointing.
The sole positive aspect influencing MultiChoice’s share
value was Canal+’s R125 per share acquisition offer.
Nevertheless, industry experts cautioned that the agreement
would encounter numerous obstacles, including gaining approval from the
Independent Communications Authority of South Africa (ICASA) and the
Competition Commission.
Consequently, the deal’s completion is uncertain, presenting
a substantial downside risk for current shareholders.
Shane Watkins, an expert from All Weather Capital,
anticipates a potential decline in the share price below R60 in the absence of
the proposed transaction.
McCurrie is even more pessimistic, stating that the share
price could potentially decline to R40 or even R30 in the absence of a Canal+
transaction.
Watkins further stated that unless MultiChoice is acquired
by Canal+ or significantly enhances its operational efficiency, it will be
necessary to secure additional capital through a rights offering.