MultiChoice investors lose R32 billion


MultiChoice investors have lost R32 billion in six months as the DStv owner struggles to hold on to high-end subscribers and find new revenue streams.

In early March, MultiChoice was trading at over R147 per share as investors were upbeat about the pay-TV operator’s prospects.

It changed on 13 March 2023 after MultiChoice released a trading statement, warning that revenue growth in its South African business would be below expectations.

Its fixed cost base and additional Showmax costs also caused its trading margin to shrink well below the market guidance.

This news sent the share price plummeting to around R120 per share. That was the start of a six-month decline, which shaved billions off the market cap.

When MultiChoice released its results for the year ended 31 March 2023, it showed a 7% revenue increase to R59.1 billion but a 48% decline in free cash flow.

The board also did not declare a dividend due to a cautious outlook on the South African and Nigerian currencies.

One of MultiChoice’s biggest problems is that South Africans continue to dump their DStv subscriptions, especially in the Premium and Mid-market segments.

DStv Premium subscriptions declined by 6% over the last year, and mid-market subscriptions declined by 3%. Many DStv subscribers also downgraded their packages.

The impact is clearly seen in DStv’s average revenue per user, which declined from R269 to R256 year-on-year.

MultiChoice is searching for new revenue streams to address the high-end subscriber decline and compensate for lost revenue.

Its new strategy includes selling Internet packages, pumping billions into its Showmax streaming service, and acquiring a large stake in sports betting service KingMakers.

However, none of these new revenue streams are guaranteed to produce big profits. In fact, it can be challenging to make them work.

MultiChoice has already lost a tremendous amount of money after investing nearly R6 billion in KingMakers, formerly known as BetKing.

Between 2020 and 2021, MultiChoice bought a 49% stake in KingMakers in multiple transactions worth $393.5 million – equivalent to around R5.9 billion.

KingMakers did not live up to its promise. It managed to increase its revenue, but the costs associated with this growth were far higher than anticipated.

As revenue increased, the company’s profits have done the opposite. Since the MultiChoice acquisition, KingMakers’ losses have grown to a record high.

In the last financial year, KingMakers recorded a loss after tax of $28 million (around R500 million).

Its expansion plans also did not work as expected, and KingMakers exited operations in Kenya and Ethiopia.

MultiChoice announced in its latest results that an increase in the discount rates in Nigeria prompted a R2 billion write-down in the value of KingMakers.

In its capital markets presentations, MultiChoice punted its streaming service ShowMax as its next focus area.

MultiChoice said Africa is the final frontier for subscription video-on-demand (SVOD) growth and is confident that Showmax can become the leading streaming service on the continent.

MultiChoice expects a step-change in customer numbers by leveraging this partnership with Comcast and launching new products and price offerings.

The company is now pumping lots of money into Showmax and local content to facilitate this growth. It wants to create ten times more local content within ten years.

MultiChoice expects Showmax to have the same 3 to 5-year J-curve as its global peers in the streaming industry.

“We are aiming to generate revenue of more than $1 billion after five years, with a trading profit breakeven target in full-year 2027,” MultiChoice said.

However, making money from online streaming is easier said than done. For example, CNN+ was shut down one month after launch because of poor performance.

Large streaming providers like Disney+, Warner Bros. Discovery and HBO Max also struggle to make money.

MultiChoice revealed that Showmax, launched in August 2015, lost R1.2 billion in the last financial year. It would not disclose Showmax’s historical losses.

These numbers show that MultiChoice will find it challenging to achieve the planned 25% EBITDA target and free cash flow margins of around 20% with ShowMax.


Considering these challenges, JPMorgan downgraded MultiChoice from neutral to underweight in July with a price target of R80 per share.

An analyst note revealed that the Nigerian naira weakness negatively affected JPMorgan’s revenue outlook for the broadcaster.

Other challenges highlighted include the significant investment in Showmax and the harmful effects of load-shedding on MultiChoice’s South African operations.

JPMorgan adjusted its revenue outlook for MultiChoice and said it expects trading losses in 2024 and 2025.

The MultiChoice share price plummeted on the downgrade. It continued its slide, and by Tuesday, 13 September 2023, MultiChoice was trading at around R74 per share.

This means that MultiChoice’s market cap declined by R32 billion in six months, which caused tremendous value destruction for investors.


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