People across South Africa are cutting their DStv cord

 ·8 Jul 2024

South Africans and their African counterparts are dumping DStv as they move to more affordable streaming services.

MultiChoice’s financial results for the year ended 31 March 2024 showed it lost 9% of its active subscribers over the last year.

The decline in active subscribers was mainly due to a 13% decline in the Rest of Africa business as mass-market customers dumped DStv.

MultiChoice blamed tough economic conditions, where households prioritise basic necessities over entertainment, for the decline.

In South Africa, DStv subscribers declined by 5%. The broadcaster also blamed tough trading conditions for the drop.

“The South African economy continues to endure severe economic pressure, with consumers under financial distress due to high inflation and interest rates,” it said.

“Consistent load-shedding through the year has created an environment where customers without backup power were reluctant to subscribe.”

MultiChoice said households did not want to pay for DStv because they were unsure if they could watch TV during power cuts.

“The net effect was increased pressure on subscriber numbers, activity and viewership, with active subscribers down 5% to 7.6 million at year-end,” it said.

It explained that Premium and Compact Plus DStv packages declined by 8%. Premium bouquets were more stable than the Compact Plus offering.

This was due to focused retention efforts and the progression of the Premium base towards a more stable core cohort of subscribers.

The Compact base, like the Compact Plus base, was most exposed to the macroeconomic challenges. As such, it declined by 9%.

The mass market tier, which traditionally showed strong growth, declined by 2% due to pressure in the Family base.

The reality is that DStv has become a luxury which many South African and African households are not willing to spend money on.

Many more affordable entertainment alternatives exist, like Netflix, YouTube, Showmax, and Disney+.

With increased broadband penetration rates and lower data costs, South Africans are migrating from DStv to these streaming services.

The chart below, courtesy of The Outlier, shows the decline in DStv subscribers over the last financial year.

The decline in subscribers shown in financial results

The decline in DStv subscribers, which generate by far the most revenue for the company, filtered down to MultiChoice’s financial results.

Its latest financial statements showed it made a R4.1 billion loss and has become technically insolvent.

Foreign exchange headwinds and a lower subscriber base combined to result in a 5% net decline in group revenues to R56 billion.

Weaker subscriber trends and foreign exchange pressures affected group trading profit, down 21% to R7.9 billion.

MultiChoice’s loss for the year increased from R2.9 billion to R4.1 billion – a 42% decline. It is its worst performance on record.

Even more concerning is that the DStv owner has become technically insolvent. Total assets declined from R47.6 billion to R43.9 billion, while liabilities increased to around R45 billion.

This leaves MultiChoice with a negative equity of R1.068 billion, which means it is technically insolvent.

Simply put, MultiChoice cannot settle all its liabilities if all its assets are liquidated. This is a dismal state for a company.

Wayne McCurrie from FNB Wealth and Investments described MultiChoice’s latest results as truly awful.

He said the only saving grace for MultiChoice’s share price was the Canal+ offer of R125 per share to acquire the company.

However, analysts warned that the deal would face many hurdles, including approval from the Independent Communications Authority of South Africa (ICASA) and the Competition Commission.

Therefore, it is not certain that the deal will go through. This poses a significant downside risk to current shareholders.

Shane Watkins from All Weather Capital expects the share price to drop to below R60 if the deal does not happen.

McCurrie is even more bearish, saying the share can go to R40 or even R30 if there is no Canal+ deal.

Watkins added that unless MultiChoice is bought by Canal+ or dramatically improves its operations, it will need to raise capital through a rights issue.

Read: Vodacom CEO scores R61 million payday

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