LEADERSHIP AND STRATEGY
Q&A with the Chief Executive Officer and Chief Financial Officer
Chief Executive Officer
Chief Financial Officer
"We continue to enhance our product offering to deliver exceptional customer experiences"
Can you tell us more about MultiChoice’s strengths as well as its macro operating
Africa is attractive to MultiChoice as one of the fastest-growing video-entertainment markets globally. As a result of our sustained investments, our brands are household names and the considerable support we enjoy from our customers ensures that we retain a leading market position. Despite tough economic conditions and uncertainty in the macroenvironment during FY2019, our business continued to grow, and we now serve approximately 15.1m active households across the continent. We also benefit greatly from Irdeto being part of the MultiChoice group, delivering secure technology solutions.
How has MultiChoice performed during FY2019?
We achieved sustained growth in the middle and mass markets, while subscribers in the premium market declined. The average revenue per user (ARPU) declined from R252 to R241, largely due to a change in subscriber mix towards the mass market in South Africa. However, record overall subscriber growth, improved customer retention and cost-control measures contributed positively to growth in profitability.
We recorded trading profit at R7.0bn for FY2019. We remain focused on returning the Rest of Africa business to profitability and optimising cost structures to expand our margins. Our investments in local content resulted in the addition of 4 600 hours of local content, taking our total local content library to nearly 50 000 hours. Our spend on local general entertainment content as a percentage of total general entertainment content improved from 38% to 40%, in line with our local content investment strategy.
Consolidated free cash flow was R3.3bn. Capital expenditure remained under control at R0.98bn, slightly up due to additional investments in our information and technology infrastructure to improve the customer experience. Our cash-conversion ratio remains positive at 90%.
MultiChoice’s total tax contribution was R10.2bn (direct taxes R3.7bn and indirect taxes R6.5bn) for FY2019.
Irdeto recorded stable free cash flow and was able to increase margins through tight cost controls.
Did MultiChoice focus on new product development or enhancements to current products?
We continue to enhance our product offering to deliver the best customer experiences. During FY2019, we refined our bouquet structure to ensure we can serve different market segments, and match price and value propositions accurately. We also repositioned and expanded our family offering to include new general entertainment and selected sport at that bouquet level.
Our newly created Connected Video division focused our efforts on our digital properties, and we are seeing results. Our online properties are gaining traction, and we doubled online active users in FY2019. Our digital strategy is key for securing our future and our objective is to be the leading online viewing destination in Africa.
From the Irdeto perspective, we are exploring new opportunities to increase our business in connected industries. This includes applications that make use of the IoT for passenger vehicles, home-entertainment experiences, industrial applications and cybersecurity. We also continuously strive to enhance our current product offering to deliver world-class solutions to subscribers.
Are there any insights into MultiChoice’s content offering that you can give us?
Our general entertainment programming and compelling sport offering remain relevant to our subscribers. Our investment in DTT infrastructure enables us to serve the mass market at a lower cost with greater flexibility to tailor local viewing packages. Our strong local partnerships enable on-the-ground access to diverse markets, enhancing our capabilities to cater for our customers and reducing complexity on our platforms.
Our continued investment in local content is well received by subscribers, with our channels among the top performers in their peer group. It is crucial to contain content costs, given the pressures we face on ARPU, revenue growth and margins. We delivered well on that objective during FY2019 by limiting overall organic cost increases while increasing investment in local content and navigating cost pressures from suppliers, driven by continued competition for key content. This is positive from an operating leverage perspective.
How does MultiChoice approach customer service?
Our customers are the cornerstone of our business. We are committed to delivering exceptional experiences at every touchpoint, and we value authentic communication and feedback. We continuously track and analyse our interactions to improve on the services we provide, and the way customers experience our brands. During FY2019, our consumer-satisfaction score (CSAT), measured by customer surveys, improved. We will continue to transform our customer experience by simplifying complex business processes, reducing customer effort, and using artificial intelligence to automate non-value transactions and optimise self-service.
Can you talk us through MultiChoice’s competitive landscape during FY2019?
Competition continues to increase in our markets with growing video consumption on online platforms and global players like Netflix, Amazon, Facebook and iFlix continuing to offer alternatives in our territories. In the pay-TV market, operators such as StarSat, ZAP TV, Zuku TV and Azam TV all have the necessary broadcasting knowledge and experience to compete with MultiChoice. Improved mobile broadband penetration also facilitated growing competition in the provision of OTT services with the entry of StarTimes ON, iRoko TV, Cell C black and Vodacom VideoPlay. Our competition also includes user-generated content. In the context of Irdeto’s operating environment, increasing competition has been identified as a high risk. This includes user-generated content and larger players in the market. We also observe a drive for consolidation between operators and content owners, which impacts negatively on our business as larger conglomerates look to rationalise cost structures.
How does MultiChoice’s organisational structure support its strategic priorities?
During FY2019, we concluded a restructure to align our structures with the company strategy and to reposition the business for growth. The work in reducing our cost base will continue in the near future to maintain our margins. We will also continue to develop and invest in digital, systems and machine learning (ML) and artificial intelligence (AI) capabilities to enable our growth into the future, including investing in and developing the required talent and capabilities.
Looking ahead at FY2020, what do you anticipate for MultiChoice?
In the year ahead, we plan to continue investing in local content and expand our OTT offering.
In SA, our focus will be on delivering growth in the mass market, retention in the premium segment, stable margins and strong cash flows. In the rest of Africa, we will continue to drive scale to return the business to profitability and Irdeto is looking to increase its market share in media security and connected industries.
As a group we are looking to:
- generate sustained top line momentum and further margin expansion
- implement the Phuthuma Nathi flip-up transaction before the end of the current financial year, and
- deliver on our commitment to pay a dividend of R2.5bn for FY2020.
We are excited about the year ahead and continue to believe in the growing appetite for video entertainment across the African continent.