MultiChoice, the South African media giant, is navigating a challenging fiscal year ending March 2024, marked by declines in both revenue and subscribers. CEO Calvo Mawela has articulated a strategic approach to mitigate these setbacks, emphasizing substantial cost savings without resorting to retrenchments.
Financial Performance and Strategic Measures
Fiscal Year 2024 Performance:
- Total Active Subscribers: Declined by 9%.
- Geographical Impact: Subscriptions fell by 13% in key markets like Nigeria, Angola, Kenya, and Zambia. South Africa experienced a smaller decline of 5% due to effective retention strategies.
- Revenue Impact: Depreciation of local currencies in the “Rest of Africa” markets led to a 32% reduction in USD revenues.
- Organic and Reported Revenues: Organic revenue increased by 3%, but reported revenue dropped by 5% to ZAR 56.0 billion (£3.04 billion). Similarly, subscription revenue rose by 2% organically but fell by 7%.
Cost-Saving Initiatives
Mawela highlighted the company’s ambitious plan to save R2 billion by 2025. This strategy involves:
- Focusing on High-Cost Areas: Targeting “big ticket” items like satellite leases for renegotiation.
- Avoiding Retrenchments: Implementing cost-saving measures without cutting jobs.
- Enhancing Digital Products: Developing and integrating digital products with the existing pay-TV base to boost revenue streams.
Mawela expressed confidence in this strategy, stating, “Our strategy to grow these additional revenues is no longer just a vision, it is gaining real traction.”
Showmax’s Growth and Future Prospects
Showmax, MultiChoice’s streaming service, has shown promising growth:
- Revenue Growth: Achieved a 22% organic revenue increase, reaching ZAR 1.0 billion (£54.475 million).
- Future Revenue Target: On track to generate $1 billion in revenue within five years, despite current trading losses.
Acquisition and Market Dynamics
Canal+ Involvement:
- Canal+ has been actively acquiring shares in MultiChoice and is in discussions to buy the company for up to R35 billion.
- Canal+ emphasized maintaining MultiChoice’s high brand value, with no plans to rebrand post-acquisition.
Market Challenges:
- Peter Takaendesa of Mergence Investment Managers noted the insufficiency of new revenue streams to fully counteract the pressures on the traditional pay-TV business.
- He highlighted Canal+’s acquisition offer of R125 per share as a significant positive driver for MultiChoice’s share price.
Conclusion
MultiChoice is taking decisive steps to stabilize its financial position amid declining subscriber numbers and revenue. By implementing significant cost-saving measures, focusing on digital product development, and leveraging strategic partnerships like that with Canal+, the company aims to navigate current challenges and position itself for future growth. Despite the hurdles, the proactive approach and strategic vision of CEO Calvo Mawela offer a path forward for the media firm in a competitive and evolving market landscape.
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