When the shares of Multichoice Group jumped by 8.5% to 102.62 rands on Wednesday at the Johannesburg Stock Exchange, South Africa, a lot of observers were shocked by the news, as it had not recorded such feat in months.
The development, some observers said it could be attributed to the 2020 full-year result of the group, which was released on Wednesday. The pay-TV announced a 5% growth in its subscribers base when it rose to 19.5 million. While it recorded revenue growth of 3% to close at R51.4 billion, its core headline earnings were up by 38%. No wonder, it could afford to pay a dividend of R2.5 billion (N57.9 billion) to its shareholders.
Other observers argue that the development could also be attributed to the news the group broke in the financial report. The group stated that it had signed a deal with Netflix Inc. and Amazon.com, its US rivals to offer its streaming services through its new decoder. This move, no doubt, would help Africa’s largest pay-TV firm retain teeming subscribers and attract potential viewers.
The deal was disclosed in MultiChoice’s results presentation, tagged ‘Improve Retention’ shared on its site and seen by Nairametrics.
This could indicate ‘If you can’t beat them, join them’ move, as the duo rivals have been giving Multichoice run for its money, creating greater competition, offering cheaper and faster internet speeds, which enabled them to stamp their feet on the continent.
How would Multichoice benefit from the deal?
While observers await Multichoice’s announcement on how the move could affect it’s monthly fee probably in a few weeks, a top executive of the group explained that it is a win-win situation for the company.
“What would typically happen is we would get commission on whatever revenue gets generated by customers coming from our platform,” Chief Financial Officer Tim Jacobs said in a phone interview, according to Bloomberg.
The financials stated that the group recorded 8% year-on-year subscribers growth in Nigeria, highest in Africa, as it recorded losses in Zimbabwe (41%), Zambia 11%, Angola 2%, while Kenya was constant. It also recorded a 22% growth in subscribers revenue in Nigeria.
No doubt, it stated in the report that the group expects it’s new bouquets and 1H FY2020 migration would earn more for the company by the end of the 2021 financial year-end.
Meanwhile, Netflix has also made an effort to produce more African content. Dramas “Queen Sono” and “Blood and Water”, both South African, debuted on the service this year, supported by extensive marketing campaigns.
“There is little overlap between content on Multichoice’s Showmax, that is now 50% local, and a service like Netflix at the moment, hence we find deals with other video-on-demand services complementary,” said Jacobs.
Impact of COVID-19
The full impact of the COVID-19 pandemic on the business is yet unknown, MultiChoice explained that it expects weaker economic growth and higher unemployment in many of its markets. “The TV provider continues to film local productions, taking specific precautions such as splitting production teams,” Jacobs added.
Download Nairametrics App for breaking news and market intelligence.