- Multi-choice succumbs to macro-economic challenges
- NBCU signs a high-value deal with Multi-choice
- Power outtages in SADC drag economic growth
Harare - Multichoice, which last week announced a major deal with NBC Universal and Sky relating to its streaming business, Showmax, has painted a gloomy outlook for the 2023 financial year.
In a profit warning, the company said sustained high levels of loadshedding are having a significant negative impact on the activity levels of the customer base and that, combined with the negative effect of a weak economy on consumer spend, points towards weak generation of revenue in the core market of South Africa in the second-half.
South Africa is Multi-choice’s biggest market by size of income, at 65%, and with 9 million subscribers. The company boasts of 22 million subscribers, mostly concentrated on the linear video service - DSTV.
When Multi-Choice reported 2023 first-half financial results on 10 November 2022, it cautioned on the ongoing economic challenges facing various markets, but it was looking forward to a second-half subscriber growth and activity being buoyed by the broadcasting of the FIFA World Cup (FWC) from November to December and Festive Season momentum.
The company said that although the FWC delivered subscriber numbers broadly in line with expectations, the operating environment in South Africa has deteriorated beyond expectation over the last few months.
South Africa is presently facing rolling power cuts stretching beyond up to 10 hours a day. This is the country’s worst power crisis in history and is on the backdrop of failing capacity and corruption at state owned power producer ESKOM.
It is expected that the status quo will remain in place for at least the next 2 years, meaning the operating environment will remain depressed, impacting negatively on business. Meanwhile, data released by StatsSA, the national statistics provider, showed that the SA economy declined by -1.3% in the final quarter of 2022 on the backdrop of a slack in multiple sectors of the economy.
South Africa’s economy has grown by only 0.3% since the pandemic in 2019 and power outages have played a major role in the underperformance. The case for power challenges in Multi-choice has not only been limited to South Africa.
Neighbouring Zimbabwe has been undergoing chronic power outages stretching a maximum of 18 hours a day. Further North, Zambia has been facing the same challenge which it recently announced that it has resolved.
Meanwhile, Multi-choice is set to unlock significant value following its penning of a deal with NBCU. Its streaming service, Showmax, will receive a capital injection, migrate to the more advanced Peacock streaming software and receive a catalogue of content from NBCU’s deals including original content. Showmax will be better equipped to compete on the Sub-Saharan landscape through localised content as a niche.
The company said given the additional costs it has incurred in relation to the Showmax deal with Comcast, it expects the segment’s full year trading margin to range between 23% - 28%, which is below the market guidance of 28% - 30%.
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