Our most frequently asked questions on MultiChoice Group:

What is your policy on dividends and/or share buybacks?

  • Our philosophy is to return excess cash to shareholders in the most optimal way.
  • In order to retain financial flexibility as a newly listed company, we do not currently have a formal dividend policy.
  • We currently require financial flexibility to fund our Rest of Africa business back to profitability, to invest in future growth opportunities and to navigate any future market volatility (an approach which has been vindicated by the macro economic pressures caused by the recent COVID-19 pandemic and associated government lockdowns).
  • We also aim to repurchase shares in the market to offset dilution from share scheme incentive awards.
  • In FY20, we met our initial R2.5bn dividend commitment made at listing and repurchased R1.7bn in shares, of which R1bn were general buybacks.
  • A dividend declaration is made by the board in June each year, taking into account our financial position, business plan and market circumstances. In doing so, the board generally takes a prudent approach to managing our financial position to ensure that we operate responsibly and sustainably.

What is your policy on issuing equity? What is your policy on taking on debt?

With regards to issuing equity:

  • Equity funding tends to be relatively expensive (unless our share price is significantly overvalued).
  • While we typically view it as a last resort, opportunities and/or circumstances may warrant an equity capital raise or share issuance in future.

With regards to taking on debt:

  • We seek to be responsible custodians of our owners' financial capital and sustain the trust and confidence they have in us.
  • We will look to optimise our balance sheet over time, but will do so cautiously, to ensure that we operate responsibly and sustainably.
  • We have gradually increased our debt beyond just our finance leases (which represent an operating cost in our view) with an amortising working capital loan of ZAR1.5bn (concluded in November 2020). The loan has a 3-year term and bears interest at 3-month JIBAR + 1.70%.

What are the prospects for returning the Rest of Africa (RoA) business to profitability?

  • Assuming normal currency depreciation, we are still on track to return RoA to profitability in FY23 at the trading profit level.
  • We have consistently narrowed RoA losses at each reporting period. This was despite having to absorb some exceptional currency weaknesses in core markets (e.g. in the Angolan kwanza, the Zambian kwacha and the Nigerian naira).
  • Had it not been for this significant currency weakness, the business would have likely reached breakeven already.
  • Our Rest of Africa business was historically profitable prior to the macro and FX challenges of 2015/2016. Since then it has undergone a significant repositioning as we implemented our 'Value Strategy' (i.e. we introduced lower-priced bouquets, adjusted the content mix and value proposition across tiers, implemented higher upfront subsidies on set-top boxes to drive scale and tightened our focus on cost controls to support positive operating leverage). These changes to the business, in conjunction with our currency hedging programmes, mean that the business is more resilient than in previous business and economic cycles.

How sustainable are the margins and cash flows in the South African business?

  • We maintained trading margins for the South African segment of between 30% - 32% over the past seven years, despite slower growth in a maturing business and a mix shift towards mass market.
  • Our trading margin guidance for FY23 of 28% - 30% reflects a more challenging macro environment with rising inflation and interest rates, somewhat reduced scope for cost savings, normalised ad revenues and more limited pricing power in top- and mid-segments due to affordability issues in the current environment

How is the South African subscriber mix evolving, and is the decline of Premium a risk to the business?

  • The SA business is more mature, and growth is coming predominantly from the middle and mass markets.
  • The Premium subscriber base has been declining in recent years, mainly due to challenges around affordability because of a weaker economic climate.
  • We expect the base to stabilise over time as the economy improves and as the Premium base reaches a level of customer that can afford the price point and sees significant value in having access to the best of local, sport and international content in a single package.

To what extent are you able to drive further cost savings and where do you see remaining opportunities to save?

  • In recent years we have typically targeted approximately R1bn in cost savings per annum. For FY23 we have set ourselves a target of R0.8bn in cost savings.
  • Areas of future savings will likely be lumpier than historically but will likely include:
    • Upgrading and streamlining of business systems and removal of legacy systems,
    • General business efficiency drives (including adopting some COVID-19 learnings),
    • Renegotiation of content rights,
    • Ongoing digitisation of the business

How do you manage your foreign currency exposure?

  • We typically price in local currencies, but since around half of our group cost base is in hard currency (notably content, transponder leases and set-top box costs), we typically face some foreign currency exposure.
  • We manage this exposure by hedging (i.e. taking out forward exchange or futures contracts), by shifting agreements to local currency where possible (e.g. including currency protection clauses in contracts) and by increasing our investment in local content. We publish details on our hedging rates and cover in the appendix of our semi-annual results presentations.
  • We typically assume ongoing currency weakness in our business plans, broadly in line with inflation differentials.
  • In South Africa, we hedge our US dollar cost exposure up to 36 months out. Given the longer-dated nature of the cover, we have flexibility to sit out of the market during volatile periods.
  • In the Rest of Africa (which we manage as a US dollar business) we hedge net remittances from those markets where it is economically viable and typically do so 12 months out. In these markets, content and other hard currency costs are recharged from South Africa or incurred directly (e.g. transponder lease costs).
  • We cannot avoid the impact of currency translation effects on our reported numbers (which is why we also report organic growth figures in our financial results).

To what extent do OTT services represent a meaningful threat and/or opportunity?

  • Given changing consumer habits, Connected Video (OTT) represents an important aspect of our multi-pronged growth strategy.
  • While we still see ample opportunity to scale our traditional linear pay-TV business (penetration in sub-Saharan Africa is still relatively low and satellite remains the cheapest way of distributing long-form video content to the broadest segment of the market), OTT represents a meaningful long-term growth opportunity for us.
  • Our aim is to further develop our world-class OTT platform and to grow with this market. We are well positioned to compete given our strong local content offering which aligns with viewer preferences, our access to live sport, relationships with international studios and content providers, strong partnerships (telcos, distributors), well-developed payment solutions, competitive pricing, comprehensive coverage of connected consumer devices, and investment behind engineering capabilities and software development.
  • We compete in the OTT market through our Showmax SVOD product and the standalone DStv Streaming products. Our products are gaining good traction with growth in active users, play events and paying subscribers.
  • Although high data costs are impeding the large-scale uptake of OTT products in the short-term, we expect the addressable OTT market to grow quickly once connectivity bottlenecks start to improve.

What is Irdeto? How does it fit into the MultiChoice Group?

  • Irdeto is a leading global digital platform and cybersecurity business that protects platforms and applications for both traditional linear and OTT video entertainment, as well as for video games, connected transport and other connected industries sectors.
  • Headquartered in the Netherlands, Irdeto is 100% owned by MultiChoice Group. It is integral in providing media security services to the group and also provides valuable strategic insights into emerging industry trends.
  • Irdeto generates US dollar revenues, has over 400 external clients in more than 70 countries and is a profit centre for the consolidated group accounts. It also creates some industry and geographic diversification benefits for the group.
  • Over the medium-term, Irdeto aims to create meaningful value with its strategy to drive market share gains in its core Media Security business while growing revenues in its Connected Industries business.

What is the status of the Canal+ investment in MultiChoice Group and is there scope for closer collaboration?

  • Groupe Canal+ SA held a 26.26% stake in MultiChoice Group, as of September 2022 as announced via SENS.
  • We have engaged constructively with Canal+ and are exploring potential areas for further collaboration.
  • We have a good historic working relationship with them which now includes several local content co-productions.

Why has MultiChoice Group invested in BetKing and what are the prospects for that business?

  • We selectively consider investment in new business lines where they create a better customer experience, drive new revenues and/or leverage existing assets.
  • The investment in BetKing is a consequence of this approach and our strategy to invest in adjacencies to enhance our ecosystem by leveraging our scale and reach.
  • Sports betting in particular is an attractive market for us, given its natural fit with pay-TV. Research has shown that viewers are more likely to watch and engage with sport when they have bet on a game, which improves activity and retention of our pay-TV customers.
  • Unlike its peers, BetKing is a unique platform business that owns and operates its proprietary technology and product portfolio.
  • This scalable capability enables the business to take a customised approach to expanding its footprint, which we can assist with given our established presence across 50 markets in Africa. It also allows for rapid expansion of products and services on the betting platform.
  • BetKing entered the African betting market in 2018 and is already a major player in its original and largest market, Nigeria.
  • We see a promising outlook for the sport betting industry as a whole and for BetKing given its entrepreneurial management team.