MultiChoice Group stays committed to the challenging Nigerian market – CEO

Despite facing severe economic challenges in Nigeria, MultiChoice Group remains committed to its operations in the country. The pay-TV operator reported in its 2024 annual results that the Nigerian branch contributed over R4 billion ($216.9 million) in foreign exchange losses over the past year.

Nigeria’s high inflation, exceeding 30%, driven by the crashing naira and the removal of fuel subsidies, has put significant pressure on consumer spending. This situation has forced many to prioritise necessities over entertainment.

“This is short-term pain for long-term gain. Provided they continue with these reforms, it will pay off,” said MultiChoice Group CEO Calvo Mawela in an interview with TechCentral. 

The policy changes are “what everyone has been calling for – they removed the oil subsidy and let the market decide where the naira has to trade.”

He highlighted that the $216 million forex hit in Nigeria is four times larger than the combined losses of the past four financial years. 

Despite these challenges, Mawela expressed confidence in the Nigerian government’s recent policy changes under President Bola Tinubu, including the removal of the oil subsidy and allowing the market to determine the naira’s value. 

These measures are expected to stabilise the economy and attract infrastructure investments.

Read also: Nigerian Tribunal fines Multichoice N150m, one-month free DStv/Gotv subscription for users

“We think the worst should be behind us [in Nigeria]. There is some stability now in terms of currency depreciation. If they continue with the removal of the oil subsidy, the fiscus will benefit and there will be investment into infrastructure.”

Multichoice records a 9% drop in subscribers

Meanwhile, MultiChoice reported a 9% decline in its group subscriber base, largely due to a 13% drop in the “rest of Africa” segment (all other countries except South Africa), where customers in countries like Nigeria had to choose essentials over entertainment. 

The Nigerian market alone saw an 18% decline in active subscribers, causing its revenue contribution to the “rest of Africa” segment to fall from 44% to 35%.

The group managed to remit US$ 184 million from Nigeria in the 2024 financial year, up from $ 132 million in 2023, despite the challenging currency situation. At the end of the financial year, MultiChoice held $ 39 million in cash in Nigeria, down from $ 104 million the previous year, due to efforts to remit cash and the impact of the weaker naira.

 The South African business, more resilient, saw a 5% decline, with the subscriber base standing at 7.6 million households by the end of March 2024. Severe load shedding during the reporting period further discouraged potential subscribers from signing up.

The Premium tier, including DStv Premium and Compact Plus bouquets, declined by 8% in South Africa despite targeted retention efforts. The midmarket Compact base, most exposed to macroeconomic challenges, declined by 9%, while the mass-market tier fell by 2% due to pressures on the Family base, the impact of load shedding, and reduced decoder subsidies.

A 3% decline in subscription revenues and softer advertising income weighed on the segment’s total revenues, which fell by 2% to R33.6 billion ($1.82 billion). 

However, strong growth in new revenue streams, especially the insurance business, partially offset this decline. The insurance business reported a 35% increase in premium revenue to almost R1 billion ($54.2 million). Several cost-reduction measures enabled the South African business to achieve a trading margin of over 26%.

Group revenue rose by 3% organically but declined by 5% to R56 billion ($3 billion) due to weaker local currencies and consumer pressure. Subscription revenues climbed by 2% organically but fell by 7% on a reported basis, impacted by the devaluation of the Nigerian naira over the past year.

Despite a challenging environment, MultiChoice achieved a 24% rise in group trading profit on an organic basis, largely due to an additional R1.4 billion ($75.9 million) investment in Showmax aimed at driving future growth in subscriptions. However, after accounting for the R4.5-billion ($244 million) impact of foreign exchange weakness, reported trading profit declined by 21% to R7.9-billion ($428 million).

The numbers would have been worse without aggressive cost-cutting measures, including R1.9 billion ($103 million) in cost savings and R1.5 billion ($81.3 million) in reduced decoder subsidies. These efforts resulted in positive operating leverage of 4.3%, with a 3.3% organic revenue increase against a 1% organic reduction in operating expenses.

Free cash flow amounted to R589 million ($31.9 million), affected by lower profitability and R1.7 billion ($92.1 million) in Showmax platform payments.

The group maintained substantial cash reserves, with R7.3 billion ($395.8 million) in cash (before short-term commitments) and access to R4.1 billion ($222.1 million) in undrawn borrowing facilities, providing significant headroom and flexibility to fund future opportunities.