MultiChoice Group CEO Calvo Mawela has reassured the market that it’s not all doom and gloom at the DStv operator, after it posted disappointing full-year results.
Mawela yesterday spoke to ITWeb after the JSE-listed company posted financial results that reflected a dwindling subscriber base and plunging group revenue.
For the year ended 31 March, the video entertainment firm’s overall active subscribers declined by 9%, while group revenue dropped 5% to R56 billion.
According to Mawela, the reduction in subscribers was largely caused by the removal of subsidies on offerings in some of its key markets.
On the depreciated revenue, he points to the tough economic environment in African markets.
Across its ‘rest of Africa’ business, MultiChoice reported a 13% drop in subscribers, while South Africa witnessed a 5% dip.
The CEO believes that with a diversified business portfolio and the relaunched Showmax video streaming platform, the company will turn around its fortunes.
“We had to navigate a challenging macro-economic and consumer environment on the continent, with high inflation, rising interest rates and volatile local currencies, as we have seen in the Nigerian market.”
Mawela notes the Nigerian naira moved from about $400 to about $1 900, before it pulled back to about $1 400 to $1 500. Inflation is sitting at about 30% in the Nigerian market.
“Some of our markets also faced headwinds in terms of currency depreciation. The rand has not performed well in the past financial year. It also had significant depreciation.”
Tactical decision
He says that after considering what it faced at that particular point, the company decided to focus on the financial aspect of the business: preserving revenue, trading profit and preserving cash.
“If you look at the ‘rest of Africa’, despite all the headwinds, we have managed to increase our trading profit by 48% at R1.3 billion. This is despite having a R4 billion forex hit in just one financial year.
“This points to the cost saving plans we have put in place and executed well. We reduced subsidies in all the markets and that’s why you will see a drag on our subscriber numbers. It’s a tactical decision that we took, considering where we find ourselves as a business.”
To counter the challenges around the uncertain economic recovery globally and across the group’s operating footprint, the group says it will continue to drive business efficiency and cost optimisation, with an increased cost savings target of R2 billion.
“There are a lot of areas where we think we can save money. We can hold back on expenditure, starting from paybacks, to content savings that we can find. We also want to monetise our content across our two platforms. We are still a long way from removing subsidies in all our markets.
“Technology also improves on a year-to-year basis. The next decoders that will come in will probably be cheaper than the one we currently have. What we are happy about is that the DNA of cost savings is across all of our businesses now. Every staff member is now conscious of cost savings.”
According to Mawela, the firm increased subscription fees twice in the past financial year, to cater for the depreciation in the currencies, as well as inflation.
“We believe the strategy worked well under difficult circumstances, especially when you look at the fact that revenue was down 5% – not as bad considering what the market is facing. Trading profit is still being maintained across the ‘rest of Africa’.
“Overall, we are satisfied with what we have done in order to safeguard the future of this business. If things improve, we think we are still a place where people would want to watch content because we offer the best content by far.”
Quality over quantity
He points out that the pay-TV provider will focus on subscriber retention in the coming financial year.
“What we are clear about is as a result of us cutting subsidies and increasing pricing to cater for inflation, the quality of the subscribers remaining on our base is much better. We will continue on that path and as things improve, we will decide how to stimulate the market again.”
Mawela dismissed the notion that MultiChoice is losing customers to global video streaming giants, such as Netflix and Disney+.
“Those have always been there; it’s not a new phenomenon that all these OTT [over-the-top] players have come into our market. What we are seeing is they are also beginning to focus a lot on revenue, creating profit and preserving cash.
“That’s why you saw Netflix announcing they are not going to give out subscriber numbers going forward because everybody is trying to make sure they preserve cash and run a business for profitability. We have always been doing the same, coming from a linear business, but what gives us the advantage is that we don’t have to choose to do either linear or OTT. We are doing both and are able to monetise the content we buy across both platforms.”
Mawela is pinning his hopes on video streaming platform Showmax, which was recently relaunched to bring in more revenue on the back of the English Premier League (EPL) offering.
During the reporting period, Showmax revenue grew by 22% (+22% organic) to R1 billion, while the trading loss increased to R2.6 billion.
He says the focus now is solely on driving growth by making sure people know there is the “EPL in your pocket”, at an accessible price point.
“We have had partnerships with some mobile operators across the markets where they are providing enough data that will help us with getting people to stream live games on their mobile phones. As more people become aware of this product, we think it will take off.”
Canal+ deal
On the proposed R30 billion bid for MultiChoice by French-based media giant Canal+, Mawela says: “As a board, we have already decided to support the proposal that Canal+ has put on the table, and we believe that for the two companies to come together, there will be some positivity that will come through because we operate in two separate markets, except for a few. We believe that one plus one should definitely come to three, but we still have a lot of work to get there.”
An independent board set up by MultiChoice recently determined the R125 per share offer by Canal+ is “fair and reasonable” to shareholders of SA’s video entertainment group.
“We have a compelling growth strategy to deliver long-term returns for our shareholders. We are now a diverse entertainment company with three operational core segments – video entertainment, interactive entertainment and fintech.
“We are also focusing on retention of our maturing businesses, while driving growth in new areas and continuously improving business efficiency. With that, we think we are on our way to get through the tough times and when things stabilise, we should be able get customers back,” Mawela concludes.
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