Exchange rates, rivals foil Naspers
NASPERS is facing challenges from weaker African currencies and competition from US technology operators as the company tries to grow its internet and pay television businesses.
Foreign exchange movements hurt Naspers’s pay TV business as customers paid their subscriptions in local currencies while costs were charged in dollars, chairman Koos Bekker told investors in Cape Town recently.
He said slowing economic growth in South Africa and competition from Google, Facebook and Amazon.com had hit Naspers’s online operation.
Headwinds
“These headwinds will be with us through next year,” Bekker said. “We can’t just pass on costs to our customers.”
Naspers was seeking to expand the internet business to ease dependence on its 33 percent stake in Tencent Holdings, which accounted for almost half its revenue. Naspers owns DStv, which saw subscription numbers fall in the year to March as the company raised prices to offset currency weakness, it said June 24.
Naspers’s shares declined 0.3 percent to R2 373.15 by 1.57pm in Johannesburg, valuing the company at R1 trillion. The shares closed 0.24 percent higher at R2 387. Naspers’s stake in Tencent is worth more than its own valuation.
S&P Global Ratings recently changed its outlook on Naspers’s credit rating to negative – a move that was based on the expectation that “Naspers’s profitability will weaken in 2017”, the agency said. The BBB- rating is the lowest investment grade, indicating S&P’s next move may be to cut Naspers to junk status.
“Slower organic growth in its cash-generative video entertainment operations and its limited ability to quickly adjust its cost base… are the main reasons behind the expected weaker performance,” S&P said. – Bloomberg