MultiChoice’s $1.7 Billion Losses: Analyzing the Financial Struggles

MultiChoice investors have lost $1.7 billion over the past six months as the DStv owner finds it hard to keep on to high-end subscribers and also find new revenue streams.

Africa’s leading entertainment company, MultiChoice, began experiencing declines in revenue in March 2023 after the television giant experienced a negative trend in the price of shares, which settled at R147 ($7.86) per share before falling to R120 ($6.41) per share that same month because of a warning released on March 13, 2023, about the South African revenue growth shortfall.  

After MultiChoice released its results for the year ended March 31, 2023, the company's revenue saw a 7% revenue increase to R59.1 billion, while fresh cash flow showed a 48% decline. Also, the board didn’t declare a dividend due to the watch on the South African and Nigerian currencies.

However, the statement that revealed the loss experienced by MultiChoice showed that the genesis of the television giant's revenue decline was due to the company's fixed operational costs and the huge expenses associated with its ShowMax platform. 

It also showed that these factors were what determined its trading margin, which caused a six-month decline that altered billions of dollars in the company’s market capitalization.

Another issue MultiChoice is facing is the loss of South African subscribers who are in its premium and mid-market segments. The company says that a lot of subscribers under these plans are cancelling their DStv subscriptions, and this has also contributed to the negative decline of DStv average revenue per user, which fell from R269 ($14.38) to R256 ($13.69) year over year.

DStv premium subscriptions fell by 6% over the last year, and mid-market subscriptions plunged by 3%. 

To address this issue, MultiChoice is pushing for an all-around strategy to negate the decline of high-end subscribers. The company management also disclosed that their plan revolves around diversifying revenue streams, which will focus on the sales of internet packages, notable investments in its ShowMax streaming service, and the acquisition of a substantial stake in the sports betting service KingMakers.

These strategies are ways to revive MultiChoice's financial performance.

Back Story

Between the years 2020 and 2021, MultiChoice acquired a 49% stake in KingMakers, formally known as BetKing, in different transactions, which amounted to $393.5 million, which is equivalent to R5.9 billion.

Unfortunately, KingMakers profits didn't increase, leaving MultiChoice's stake plummeting. Last year, KingMakers recorded a loss after tax of $28 million, which is equivalent to around R500 million.

Also, the company expansion plan did not work as hoped, leading the company to exit Ethiopia and Kenya.