MultiChoice better off pursuing its strategy without Canal+
French media company Canal+ is determined to buy the shares in MultiChoice it does not already own, which puts its DStv arm in a spot of bother. MultiChoice’s management, led by Calvo Mawela, now faces the reality that the French company’s bid has effectively become an attempt at a hostile takeover.
It can’t be business as usual at the MultiChoice offices in Randburg and Dubai.
Undeterred by the rejection, Canal+, the largest MultiChoice shareholder, raised its stake to 35.01%, prompting a mandatory offer to shareholders and effectively initiating a hostile takeover. MultiChoice’s priority now has to be fending off Canal+.
This simply means the focus has inevitably been shifted from the wellarticulated MultiChoice platform-led strategy to being top of choice for African households, enriching their lives by delivering entertainment and relevant consumer services through technology.
While I believe this is a good expansion strategy, MultiChoice management is at the moment seized with the Canal+ matter.
Africa’s biggest pay-TV operator is growing M-Net, SuperSport, DStv and GoTV platforms across the continent. It is already in partnership with Comcast, the US media and telecommunications conglomerate that owns the UK’s Sky Group and US broadcaster NBCUniversal.
Comcast, which has been intricately involved in helping MultiChoice build the new Showmax platform, acquired a 30% stake in Showmax.
Last month, MultiChoice partnered with KingMakers, a sports betting and digital entertainment company, to launch SuperSportBet, a platform set to revolutionise the sports betting experience for fans across South Africa. The launch of SuperSportBet was a strategic move to target adjacent markets.
Last year, MultiChoice unveiled Moment — a fintech joint venture (JV) with Rapyd and General Catlyst. This deal was part of a plan to diversify its business. The new JV consolidated the $3.5bn (about R66.5bn) in payments MultiChoice processes annually.
The new strategy looks plausible and likely to deliver value and enable the payTV operator to morph into a tech company.
MultiChoice will have to withstand any challenge it may face and seek new opportunities. The question is, how deep are its pockets?
It has a portfolio of trusted brands built over nearly four decades, recognised across Africa with more than 25,000 points of sale across 50 markets. It has a scalable payments system through Moments and local capabilities in 40 languages and more.
With so many positive things going on, MultiChoice does not need rescuing by the French media group. What it needs are bold executives who appreciate the potential of the African market. A buyout by Canal+ would be like handing over a prized jewel — the pride of Africa — to the French.
As things stand, the linear pay-TV and subscription video on-demand sectors are not showing signs of slowing down in Africa. With only 42% TV penetration of the 240-million Sub-Sahara African households, 35% of TV households subscribing to a pay-TV bouquet, and 65% receiving free TV content — growth prospects in subscription and advertising revenue are plentiful for content providers. Linear content distribution retains the lion’s share of current and expected revenue for the foreseeable future, according to Intelsat.
Besides, the environment for MultiChoice’s platform-led strategy is creating more opportunities. These are driven by Africa’s broadband (including wireless) connectivity and data prices reaching a key inflection point.
African players, including MTN’s Bayobab Africa and Liquid, are investing heavily in broadband. Mobile operators MTN, Vodacom and Orange are supporting broadband growth efforts.
So why would MultiChoice’s board and shareholders opt to sell off controlling shares to the French when the strategy already has green shoots?
SA’s MTN, which is now Africa’s biggest mobile phone operator, was nearly acquired by India’s Bharti Airtel when it thought it needed a big brother to pursue growth. Fortunately, the deal did not materialise.
Now, MTN is preoccupied with being an African player and selling off its Middle East assets. MTN’s new strategy is to make itself a behemoth returning good dividend payments to investors. In that regard, the MultiChoice board must convince investors and management that the only way to create more shareholder value is to remain a purely African entity. The only viable strategy to be pursued is to partner with foreign pay-TV operators.
Any move by Canal+ to acquire more shares in MultiChoice must not be approved by institutional shareholders.
One must understand that Canal+ is not going to disappear easily after building a massive position in MultiChoice.
That said, we must be thankful to the crafters of MultiChoice’s memorandum of incorporation (MOI) that restricts the voting rights of foreign shareholders to 20% no matter how large their shareholding. By now, Canal+ would have pushed for a seat on the board with 35% voting rights.
So the hands of Canal+ are tied and can’t influence strategy, but can only create uncertainty in the business. Key is that it would be foolish for Canal+ to try to buy MultiChoice without a hand in Showmax.
I doubt whether the Americans or Comcast, which is already a shareholder in Showmax, will be happy to jump into bed with the French.
For now, the saga continues.