By JAMES ANYANZWA

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South Africa’s entertainment firm Multichoice group is reconsidering its business plan for African operations amid falling revenues and shrinking subscriber numbers.

This comes as its pricing policy and difficult operating environments in several markets characterised by depreciating currencies, high fuel prices and high inflation push households and individuals away from entertainment to focus on basic needs.

The situation has been compounded by online piracy as illegal streaming of football matches via the internet continues to adversely impact the company’s revenues.

The loss-making group with footprint in 49 markets in the continent disclosed through its latest annual report (2023) that it is relooking at its pricing and investment policies for its African operations with hopes of reclaiming its position as an entertainment company of choice in the continent.

“We know that we need to play to our strengths – which is local content and sport – and we realise that when it comes to streaming, we need to carefully consider pricing and broadband affordability. We also understand that we need to double-down where others retreat.

Read: MultiChoice in $225m loss over forex and taxes

Africa is our home turf, we know how it works and what it takes to succeed,” the company says through its latest annual report (2023).

“With regard to allocating capital, our immediate priority is to fund the cash needs of the Rest of Africa segment after returning it to trading profitability this year. We are targeting sustainable, standalone free cash flow generation in the year ahead.”

Multichoice expects to ramp up its African operations through organic initiatives, strategic partnerships and investments in underlying businesses.

The company says the Rest of Africa (countries outside South Africa), represents a sizeable market with estimated addressable households in excess of 39 million, but is a complex socio-political environment characterised by among others intermittent volatility of inflation rates and exchange rates.

Multichoice which owns DStv, Supersport, Showmax and Kingmakers is facing serious cashflow problems after falling into the loss making territory.

“A strong US dollar and elevated oil prices, fuel and food inflation have increased in many of our core markets. Even basic staples have seen significant price increases, impacting all consumers, while the large increases in fuel prices, are particularly problematic given many individuals’ dependence on fuel for power generation beyond their basic transport needs,” the company says.

On June 18, the group entered into a deal to sell its insurance business to Sanlam Ltd, a diversified financial services company headquartered in South Africa and listed at the Johannesburg Stock Exchange (JSE), to be able to sustain its operations.

Under the deal, Sanlam will pay an upfront cash consideration of R1.2 billion ($65.87 million) to MultiChoice for its 60 percent stake and a potential performance-based cash earn-out of up to a maximum consideration of R1.5 billion ($82.34 million) that is contingent upon the amount of gross written premium for the financial year ending December 31, 2026.

Multichoice group’s net loss for the year ended March 31, 2024, increased to R4.14 billion ($227.27 million) from R 2.92 billion ($160.29 million) in 2023.

Read: French media giant submits offer to acquire Multichoice

The company also succumbed to a nine percent drop in active subscriber numbers including a 13 percent decline in the Rest of Africa business and a five percent decline in South Africa, according to the group’s audited financial statements.

The group’s decline in active subscribers was mainly caused by mass-market customers in countries like Nigeria who opted to prioritise basic necessities over entertainment.

“Returning our Rest of Africa segment to profitability, cash flow breakeven, full funding breakeven and normalised margins remains a key point of focus for shareholders and lenders. We aim for price increases at or slightly below inflation, but seek to accommodate specific in-market dynamics, (e.g. pressure on affordability) when necessary,” the company says.

The group says that the Rest of Africa represents a sizeable market with estimated addressable households in excess of 39 million, but is a complex socio-political environment characterised by among others intermittent volatility of inflation rates and exchange rates.

Sub-Saharan Africa faced a challenging macro-economic condition in 2023 with numerous global and country-specific factors impacting the group’s major markets.

The group’s mid-market segment declined by three percent in the year ended 31 2024 as a result of mid-market customers being largely impacted by rising inflation (energy and food costs), rising interest rates in a segment of the market that is increasingly over-indebted and elevated unemployment.

“A strong US dollar and elevated oil prices, fuel and food inflation have increased in many of our core markets. Even basic staples have seen significant price increases, impacting all consumers, while the large increases in fuel prices are particularly problematic given many individuals’ dependence on fuel for power generation beyond their basic transport needs,” the company says.