DStv-owner MultiChoice tanks

MultiChoice’s share price plummeted by over 17% after it warned of poor results because the “operating environment in South Africa has deteriorated beyond expectations”.

The DStv owner said it looked forward to subscriber growth in the year’s second half because of the FIFA World Cup (FWC) and festive season momentum.

“Although the FWC delivered subscriber numbers broadly in line with expectations, the operating environment in South Africa has deteriorated beyond expectations over the past few months,” it said.

MultiChoice warned investors that sustained high levels of load-shedding significantly impacted the activity levels of the DStv customer base.

The company’s subscriber growth and customer mix were further impacted by the negative effect of a weak economy on consumer spending.

Although MultiChoice did not explicitly state it, it is expected that there was a big decline in DStv Premium subscribers.

MultiChoice’s interim results for the six months ended 30 September 2022 showed that its premium and mid-market segments lost subscribers.

As a result of losing high-end subscribers, the average revenue per user (ARPU) in South Africa declined by 4%.

Losing high-end subscribers hurt the company’s top and bottom lines, and indications are that revenue growth in the South African business will be below expectations.

MultiChoice has a largely fixed cost base, and losing high-end subscribers has shrunk the group’s full-year trading to 23% to 28%, well below the market guidance of 28% to 30%.

Some consolation is that MultiChoice’s Rest of Africa business remains on track to return to trading profitability this year.

It was made possible by the positive impact of increased scale and good second-half subscriber growth over the festive season.

“As a result of an ongoing focus on cost controls, the group expects to exceed its full-year cost savings target of R0.8 billion,” MultiChoice said.

The benefits of its hedging policy should also positively impact earnings in a weaker South African rand environment.

Investors did not like the news, and MultiChoice share price tanked by 18% by 11:00 on Tuesday morning.