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A business model that drives value

Inputs

The resources and relationships we rely on
Financial capital
  • ZAR9.5bn equity (FY20: ZAR9.8bn)
  • ZAR1.4bn financial debt (FY20: ZAR0.1bn)
  • 51 969 shareholders (FY20: 55 059)
Technology and platforms
  • Widespread DTH satellite footprint covered by four different satellites (two through Intelsat and two through Eutelsat)
  • A DTT network covering 117 cities over eight countries, serviced by an Intelsat satellite
  • OTT services: DStv streaming and Showmax delivered via online or mobile platforms
  • Numerous support technologies (including artificial intelligence (Al)) for customer service, billing, playout, archiving, scheduling and Irdeto security encryption
  • A range of production capabilities that can support both top-end professional sport productions and smaller-scale productions like school sport
Industry expertise
  • 36 years’ industry experience
  • Market leadership across 50 countries
  • Deep understanding of customers’ entertainment needs
  • Irdeto has 51 years of experience in security solutions
Our people
  • 7 028 permanent employees (FY20: 6 894)
  • Inclusive, customer and people-centric culture with strong employee brand ambassadorship
Customer and supplier relationships
  • 20.9m 90-day active subscribers (FY20: 19.5m)
  • >400 business to business (B2B) customer relationships through Irdeto (FY20: >400)
  • Relationships with local and international content providers, key satellite technology providers and a network of 6 413 accredited installers and 2 833 independent service providers across Africa (FY20: 5 604 and 1 747)
  • Preferential procurement initiatives
Corporate citizenship
  • Relevant licences issued by regulators across Africa
  • Local communities who collectively produce the future of film and sport talent in the countries in which we operate
  • Local entrepreneurs supported through the MultiChoice Innovation Fund
  • Beneficiaries of the Phuthuma Nathi BBBEE scheme
  • Electricity, diesel and water usage at our operations

Business activities

Outputs

Our products and services
  • Offers services in 50 markets
  • Six core bouquets at varying price points
  • >150 linear video channels
  • Catch Up and movie rental (BoxOffice) services
  • Offers services in eight markets
  • 70 linear video channels on average
  • Four core bouquets at varying price points
  • DStv streaming service offered as a value-added service for DTH customers, and offered as a standalone streaming service
  • Subscription video on demand (SVOD) service, Showmax, is available in 50 markets with standard, mobile and sport (Showmax Pro) offerings. It has localised versions in four markets, and DStv add-to-bill options in 11 markets
  • Commercial airtime sales across 178 linear video channels
  • Cybersecurity and anti-piracy services to the group plus external customers in 72 countries, across multiple industries including media security, gaming, connected transport and other connected industries

New products and services added to our ecosystem to enhance the entertainment offering available to customers include:

  • DStv Explora Ultra
  • Movie bundles (Add Movies)
  • Insurance products
  • Third-party SVOD services
  • Sports betting through an initial 20% investment in BetKing

Outcomes

How we enhance our capitals
Financial capital
  • ZAR3.3bn core headline earnings (FY20: ZAR2.5bn)
  • 40% return on capital employed (FY20: 30%)
  • ZAR2.5bn dividend declared (FY20: ZAR2.5bn)
Technology and platforms
  • ZAR0.2bn investment in technology assets (FY20: ZAR0.2bn)
  • ZAR2.6bn transponder costs (FY20: ZAR2.6bn)
  • Investment in OTT platforms: content discovery and platform stability
  • ZAR0.6bn investment in capex to better service our customers through enhanced billing and data capabilities and ZAR0.1bn as part of an IT hardware refresh cycle
  • ZAR0.1bn building and infrastructure spend (FY20: ZAR0.1bn)
Industry expertise
  • ZAR5.9bn invested in local general entertainment and sport content (FY20: ZAR6.2bn)
  • 4 567 hours of local content produced (FY20: 3 850)
  • Local content library exceeds 62 000 hours (FY20: 56 800)
  • 42% of total general entertainment content spend was on local content (43% in constant currency) (FY20: 40%)
Our people
  • ZAR212m invested in skills development (FY20: ZAR191bn)
  • 1 859 employees formally trained (FY20: 3 018)
  • 47% of our employees are women (FY20: 47%) and 53% are men (FY20: 53%)
  • Robust compliance and governance structures
Customer and supplier relationships
  • 1.4m net additions(1) (FY20: 0.9m)
  • Irdeto increased market share with six tier-one customer wins
  • 77% customer satisfaction (CSAT) score in South Africa (FY20: 75%)
  • 72% CSAT score for DStv (FY20: 71%) and 70% CSAT score for GOtv (FY20: 70%) in the Rest of Africa
  • ZAR11.5bn preferential procurement spend with local South African suppliers (FY20: ZAR10.4bn) including ZAR3.3bn on South African SMMEs (FY20: ZAR4.9bn)
Corporate citizenship
  • ZAR11.2bn total tax contribution (FY20: ZAR12.0bn)
  • Invested ZAR446m(2) in CSI initiatives (FY20: ZAR247bn)
  • MultiChoice Innovation Fund supported 10 new beneficiaries
  • ZAR1.5bn in dividends paid to Phuthuma Nathi shareholders (FY20: ZAR1.5bn)
  • Light carbon footprint with several initiatives applied to minimise impact
(1) Relates to 90-day active subscribers.
(2) Includes non-cash advertising contributions of ZAR271m in FY21 (FY20: ZAR79m).

Managing trade-offs

We manage our capitals to create and sustain long-term value for our stakeholders. In the short term, it is not always possible for all capitals (or the stakeholders who provide them) to benefit equally, and some capitals may benefit at the expense of others. When deciding how best to allocate our scarce capital, we are often required to make trade-offs between capitals and stakeholders, and between short and long-term value creation.

Some areas where we made these trade-offs in FY21 are described below:

Keeping our people safe while maintaining customer service

The outbreak of COVID-19 and nationwide lockdowns implemented across our markets caused anxiety and uncertainty. As an essential service provider, we had to act swiftly to ensure our customers received uninterrupted service. With millions of people confined to and working from home, we had a critical role to play in keeping families informed, educated and entertained. This required heavy reliance on our essential employees to continue with business as usual at our broadcast premises and service centres.

While it was important to meet our customers’ needs, we also took every step possible to ensure our people’s safety. These steps included arranging private transportation for our South African onsite employees so that they could avoid using high-density public transport.

We also swiftly migrated entire functions such as our call centre to a work-from-home environment, which enabled us to limit the number of essential employees who were required to be onsite.

Pricing decisions

There is often a trade-off between customer relationships and financial capital when it comes to pricing. We are responsible for balancing these and achieve this by ensuring our pricing decisions are research-based and consider several factors, including local market dynamics like consumer price inflation. In FY20, we decided to keep pricing flat for the Premium bouquet in South Africa at the expense of top-line growth. This year, we made a similar decision for our Compact subscribers, considering indications that this segment of the population was experiencing high levels of indebtedness and significant financial pressure. This decision was well received by our customers and served to stimulate growth in the middle segment of our customer base. We increased the price of our Access bouquet, our second annual increase after keeping pricing unchanged for the first eight years after launch. We increased Premium pricing marginally this year.

Pricing in the Rest of Africa is based on several country-specific factors that carefully balance customer relationships with the financial implications of local currency revenue erosion due to weakening exchange rates and the impact of significant hard currency input costs. Consequently, we processed price increases this year across all of our major markets to combat rising input costs due to currency depreciation and local cost inflation.

The onset of the COVID-19 pandemic and worldwide cancellation/postponement of live sport triggered some of our customers to lobby for Premium prices to be reduced given the absence of live sport on the platform. While we value our customers’ views, we could not accommodate this request given that a broad range of core and alternative programming was available, and the fixed costs associated with the platform remained unchanged. We had to make a trade-off between temporary customer satisfaction and prudent management of financial capital in an uncertain time.

We did, however, provide sizeable discounts to our commercial customers who could not operate for a significant period due to various lockdown restrictions across Africa.

Ongoing drive for cost savings

Cost reduction and efficiencies are an important part of our strategy and enable us to deliver positive operating leverage by keeping the growth of our cost base below the growth of our revenue base. At the onset of the COVID-19 pandemic, we accelerated our cost-saving initiatives to contend with sharply weakening currencies and deteriorating macro-economic outlooks. This included taking a deeper look at our cost structures across the organisation and renegotiating content and other supply contracts where feasible. These cost-cutting measures served to enhance our financial capital but required a trade-off as some of our suppliers were directly impacted by these decisions. We realised cost savings of ZAR1.5bn during the year.

As part of our ongoing culture of driving efficiencies, we carefully monitor content viewership and returns. Where content is not performing relative to expectations and other channels, a decision may be taken to remove it from the platform. This impacts some of our customers. However, because we respect our customers’ unique viewing choices, this trade-off is typically balanced by the fact that the exiting of limited value-adding content creates an opportunity for us to reinvest savings in a better overall content portfolio. We achieve this through increased investment in local content, for example.