Opportunities and risks
How we identify and pursue opportunities
OUR TOP 10 OPPORTUNITIES
Large and growing addressable market
- We take a long-term view and are comfortable with supporting our businesses through the cycle.
- We have increasingly focused on growing penetration in the mid and mass market segments, e.g. through our value strategy in the Rest of Africa where we lowered pricing, increased upfront set-top box subsidies, and improved the content value proposition across packages to reposition the business for longer-term sustainable growth.
Fast growing OTT market
- We are accompanying our subscribers on their journey into an increasingly online environment. Our connected Explora Ultra device and DStv streaming and Showmax services, are aimed at either extending our traditional linear service online or introducing new user experiences such as our third-party SVOD partnerships.
- This creates a foundation for us to scale our OTT offerings and launch innovative services.
Sizeable and engaged subscriber base
- Our subscriber base provides economies of scale that allow us to continuously enhance our customer value proposition by developing a broader ecosystem of video entertainment and related products and services. Our scale and reach also allow us to invest in adjacent industries (e.g. sports betting) to provide an even wider array of entertainment options.
- We monitor trends in offshore markets regarding vertical integration, converged service offerings and aggregator distribution partnerships. While our markets require a nuanced and often different approach, we selectively apply these principles if and when relevant.
Deep understanding of
customer entertainment needs
- We aim to offer our customers a full service content mix with appropriate tiering to suit their circumstances. Our strong international entertainment offering and SVOD relationships complement our points of differentiation, i.e. local content and sport.
- Our increasing investment in local content enables us to tell great stories that our customers love and develop proprietary intellectual property and formats. Our ongoing focus on sport enables us to maintain a best-in-class offering by global standards.
Deep understanding of the customer journey
- We aim to continuously improve each touchpoint in the customer journey, including direct experiences such as customer onboarding, billing and technical support, as well as indirect experiences through partners like our installer network or payment service providers.
- The benefits that accrue from such an approach are reflected in retention/churn rates, upgrade/ downgrade pathways, customer satisfaction scores and customer acquisition costs (word of mouth).
Clear path to returning Rest of Africa to profitability
- Scaling our subscriber base while managing our largely fixed-cost base (including targeted cost reductions) supports our path back to profitability.
- In the interim, we have to navigate a challenging economic and foreign exchange environment using hedging programmes (where available and cost effective) and close liquidity management to help manage our cash flow risks.
Ability to make strategic investments
- Our ambition is not to become an investment holding company, but rather to source, evaluate and potentially execute on investment opportunities that (a) add value to our ecosystem and customer experience, and (b) create explicit value through expected returns that exceed our cost of capital.
Ability and willingness to partner
- While we already partner with many service providers across our business, we have an opportunity to focus on optimising current or introducing new partnerships for the benefit of the customer or business.
- These can take the form of explicit add-on services, as with our recent SVOD partnerships; implicit service points, as with payment service providers; or background partnerships, as with content co-productions.
Entrenched position in media security
- We focus on gaining new customers and expanding the scope of services with existing customers in our traditional linear broadcasting security business.
- At the same time, we are expanding our presence in less developed but growing areas of the media entertainment market, such as OTT security services, as well as online and mobile gaming security.
Growing set of markets in connected industries
- Focusing on industries where security meets safety and the stakes are high (loss of life, sensitive data, extreme brand damage, critical financial impact, etc.), Irdeto sees opportunities for growth in areas such as connected transport, connected home and healthcare, as well as data protection.
- Cybersecurity regulations also open up new areas for growth where we can provide compliance solutions for our customers.
How we manage and mitigate risks
The risk profile reflects our risk appetite as determined by the board. The risk committee is responsible for monitoring risk factors and how these are managed. Results from the enterprise-wide risk management process are integrated into the business’s strategic, operational, compliance monitoring and reporting activities. Management is tasked with managing risk and delivering financial and operational performance aligned with our risk tolerance.
OUR TOP 10 RISKS
Regulatory and licensing
- Our focus remains on full compliance with existing regulations.
- We continue engaging with regulators and industry bodies proactively.
- We conduct ongoing regulatory reviews and maintain contact with regulatory authorities and public industry bodies.
- Our dedicated, experienced teams (internal and external experts) assist with regulatory engagements, responses to inquiries and other projects/ submissions.
- We promote active engagement with management, government and regulatory authorities about how the proposed regulations could impact the industry.
Consumers are affected by the consequent pressure on disposable income, which potentially affects our addressable market, and growth and retention prospects.
- We understand the pressure our customers face and we remain focused on customer-centricity and affordability. This is reflected in our pricing decisions, which in many cases are below inflation.
- We continue focusing on reducing costs and improving efficiencies.
- We hedge our foreign exchange exposures for a minimum of 18 months, up to 36 months in terms of our treasury policy.
- We continue moving more costs into local currency.
- We offer customers various options suited to their circumstances, supporting value for money with the flexibility to adjust to their unique and changing circumstances.
- We continue investing in new products, services and businesses to diversify revenue streams into the future.
Disruption and competition
- We understand entertainment and technology are evolving, as are consumption habits. As such, we continuously invest in product and service innovations, and we focus on better products, value and customer service.
- Retaining attractive content rights is a priority, as is investing in our platforms and partnerships to maximise mutual benefits.
- We are diversifying our product portfolio and service offering by investing in opportunities in areas adjacent to video entertainment to provide a wider array of products and services to our customers.
- We continue exploring opportunities for relationships with telcos and other platforms to enhance our value proposition.
- We continuously invest in systems and technology to identify vulnerabilities and prioritise the remediation thereof to enhance systems security and reduce business interruptions.
- We employ a chief information security officer and chief data officer to ensure appropriate management attention to this critical risk.
- Controls over information assets are continuously tested, and focus on the content value chain and protection of customer and employee information.
- International studios undertake security assessments from time to time in support of their agreements with us.
- We achieved international content protection certification from the Content Delivery and Security Association (CDSA) certification during the year.
- Rights are regularly reviewed with due consideration for the economic value of each set of rights, and bids are tabled accordingly.
- We bid for and secure sporting rights, according to rights cycles as determined by sport rights owners.
- We continue to aggressively increase our investment in local content.
- We maintain our relationships with rights owners to maximise mutual benefits.
- We offer customers various options suited to their circumstances, and support value for money with the flexibility to adjust to their unique and changing circumstances.
- We invest in improving our existing systems and platforms, and monitoring, innovating and collaborating to offer increased value to customers, which are all a key part of our business plan.
- Our IT controls framework was developed and is being implemented throughout the group. The framework’s robustness is regularly reviewed.
- Significant improvements to simplify billing and business rules were implemented during the year, and we have standardised our billing system across all African markets.
- Rigorous testing programmes are implemented for all software updates and rollouts for our internal systems and platforms.
- Redundancy in key equipment and platforms was built at the disaster recovery site at our Samrand and Isando operational facilities.
- We expanded our European technical facility and redundancy for the Rest of Africa business by adding a secondary business continuity technical site.
Third-party risk management
- Significant progress is being made regarding the management of third parties. A detailed third-party risk management (TPRM) framework was approved in FY20 and has been implemented.
- All third parties with whom we do business are subject to this risk management framework, which results in a firm foundation for their effective management.
- Annual ongoing monitoring of all third parties with which we do business is a key part of the TPRM framework.
- In addition, standard anti-bribery and anti-corruption clauses are added into third-party contracts wherever possible.
Business continuity management
- Business continuity management is well established in the group and continuously improved. All operational and functional areas in the group have documented and tested business continuity plans.
- The business continuity management programme is well governed through internal executive committees, with regular reporting to the board and its committees.
- We continuously invest in our platform and application security division, Irdeto, which offers cybersecurity and anti-piracy solutions in media and gaming.
- During the year, illegal entertainment services to 0.7m households were disconnected.
Talent and skills scarcity
- The group’s reward structures are aimed at retaining employees in key areas and include bonuses and share schemes.
- We identify the scarce skills and competencies required.
- Focused recruitment of scarce skills remains a priority.
- This is supported by programmes designed to develop a pipeline of talent.
- We partner with vendors for skills transfer and programmes.