Strange MultiChoice investment analysed

Viv Govender

Canal+ is increasing its stake in MultiChoice by buying shares on the open market, but many analysts are unclear about its intentions.

Canal+ is the pay-TV unit of French media company Vivendi, which has interests in television, film, video games, book publishing, and video hosting.

Canal+ has upped its shareholding in MultiChoice from 15.37% to 26.26% over the last year.

There is speculation that Canal+ may be looking at a buyout, but it is unclear why it sees MultiChoice as an attractive investment.

Viv Govender, wealth manager at Rand Swiss, said he is surprised by Canal+’s decision to increase its shareholding in MultiChoice.

He said the pay-TV sector is under immense pressure with increased competition from streaming services like Netflix.

Govender added that Amazon’s Prime membership programme gives subscribers access to world-class video streaming services as an add-on.

MultiChoice’s advantage is that it operates in Africa, where it is still growing its subscriber base and where pay-TV opportunities remain.

While traditional TV is facing an inevitable decline globally, Africa is so far behind the developed world that it is only seeing pay-TV growth now.

There is also limited availability of fast and affordable uncapped broadband in Africa to support the widespread adoption of streaming.

It makes MultiChoice Africa an attractive acquisition target for a pay-TV operator like Canal+ looking for growth.

However, Govender warned that just because Africa is growing does not mean there is an opportunity for an old-school operator like MultiChoice to expand rapidly.

“There is a great possibility that people will go straight from traditional over-the-air TV to streaming, without ever subscribing to a satellite pay-TV service,” he said.

In many developed countries, satellite or cable subscriptions were a bridge between over-the-air TV and online streaming. Africa may leapfrog satellite TV altogether.

MultiChoice does have a few advantages over streaming services like Netflix and Amazon Prime entering the continent.

It has a big lead in producing local content in major African markets. Its expertise in this field is not easy to match.

It has also developed innovative payment solutions to address the continent’s challenges.

Mass market consumers across Africa don’t have easy access to card payments, and MultiChoice has spent years figuring out how to get paid.

International streaming services, which mainly rely on credit card payments for subscriptions, will have to adapt to effectively compete with MultiChoice.

MultiChoice Africa the big prize


MultiChoice Africa and Canal+ are a natural fit with many synergies which could unlock value for both companies.

Richard Cheesman, a senior investment analyst at Protea Capital Management, said they see the opportunity, means, and motivation for Canal+ to buy a more significant stake in MultiChoice.

He explained that there is little geographical overlap in the operations of MultiChoice and Canal+ in Africa.

MultiChoice Africa is mainly operational in South and East African countries like Angola, Botswana, Ethiopia, Ghana, Nigeria, Kenya, Tanzania, Uganda, Zimbabwe, and Zambia.

Canal+, in turn, mainly operates in francophone countries of Central and West Africa, as well as some non-francophone countries like Sierra Leone, Nigeria, Ghana and Cape Verde.

Although there is some overlap, like in Nigeria and Ghana, the two companies focus on different parts of the continent.

Cheeseman said other benefits of a tie-up include lower content costs, better satellite leases, and the expedited use of MultiChoice Africa’s tax losses.

Merging Canal+ and MultiChoice Africa’s subscriber bases will give a new entity better negotiation rights on satellite costs, rights on sports and movie rights, and channel distribution agreements.

Combining Canal+ and Multichoice Africa’s advertising sales teams will extend their reach and improve efficiency.

A combined advertising offering reaching most countries on the continent will appeal to many global and African brands.

MultiChoice’s expertise in online streaming – DStv Now and Showmax – can also assist Canal+ in its online endeavours.