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Value created for our suppliers and partners

Value created for our suppliers and partners

ZAR11.5bn spent on local South African suppliers
ZAR3.3bn spent on South African SMMEs
ZAR2.3bn spent on South African suppliers who are at least 30% women-owned

Delivering value to our suppliers and partners

Our core business of delivering great content to our customers is not something that can happen in isolation. We rely on our suppliers and partners who provide critical input into our value creation process. In return, we provide value through the fees we pay and the scale we offer. We prefer to adopt a partnership mindset with our suppliers, seeking to support them as far as possible while balancing other competing stakeholder needs.

However, given our focus on driving efficiencies and cost controls, we must ultimately ensure the economics of our contractual relationships support the prices we pay. Therefore, we adopt a firm but fair approach when engaging with our suppliers, considering our mutually beneficial relationships with them.

Our suppliers range from large international studios and sports rights holders to the family-owned store that sells our set-top boxes and the individual who installs them. The common thread in these relationships is a commitment to work together to achieve our objectives, and to do so responsibly and ethically. Our suppliers are subject to comprehensive background checks set out in our third-party risk management framework. They are expected to be aware of and adhere to our code of ethics and conduct, and related group policies. Reference to our code of ethics and conduct is also included in third-party procurement contracts for major subsidiaries.

For our largest categories of procurement, we spent ZAR18.0bn on content, ZAR2.6bn on transponders and ZAR5.2bn on set-top box purchases in FY21. Other critical third-party suppliers and partners include our agent and installer network that helps us sell and install our set-top boxes and satellite dishes, and our third-party payment partners with whom we solve the challenges of accepting payments from a diverse customer base in markets that are currently largely cash-based and also showing a propensity to adopt digital and mobile self-service options. We also rely on more typical enterprise services and consultants across the legal, accounting, regulatory and IT fields. This year, we saw new partnerships emerge as we took steps to expand our entertainment ecosystem by including access to third-party SVOD services through our set-top boxes and acquiring a minority stake in BetKing, a pan-African sports betting company.

  • Content
  • Set-top boxes
  • Transmission and transponders
  • Agency, installers and payment partners
  • Critical systems
  • Irdeto

Content

Content is the most important input of our value chain and includes packaged third-party channels, the third-party content we package in our own channels and locally produced content that we commission and own. More recently, we partnered with select content creators to co-produce series or movies, for which we typically obtain distribution rights for our markets in sub-Saharan Africa. Our partners then obtain distribution rights for their target markets. This innovative model enables all parties to benefit from a better quality production at a shared cost.

Our general entertainment and sporting rights suppliers help us provide the best entertainment to our customers and, in return, we enable them to reach millions of viewers and build their brands across Africa. We experienced the value of our content partnerships this year in particular, as we all had to navigate the effects of COVID-19 on our businesses. With production halts impacting some of our international general entertainment schedules, and the cancellation and postponement of live sport, we worked with our suppliers to roll out replacement content and, for sport, some library footage to fill the consequent gaps in our line-ups. Given the significant rand volatility experienced during the year, we also successfully appealed to some of our general entertainment suppliers to adopt a shared approach to currency risk, either through negotiating contracts into local currency (as two major suppliers did) or through sharing hedging costs.

Regarding local content, we work with industry participants in our largest markets to deliver compelling local language content and channels, notably South Africa, Nigeria, Kenya, Zambia, Tanzania, Uganda, Angola, Mozambique and, more recently, Ghana and Ethiopia. Our investment in local content industries in these markets supports several production houses and is fundamental to the prosperity of the industry as a whole. Similarly, partnerships with various local sport leagues such as the Premier Soccer League (PSL) in South Africa, the Super League in Zambia and the Ethiopian Premier League, are important to the success of these leagues and funding sport in general. Our production partners' wellbeing is important to our business. At the onset of COVID-19, MultiChoice created a ZAR80m fund to safeguard the income of impacted cast, crew and creatives, which in turn ensured the sustainability of our business.

Set-top boxes

Most of our set-top boxes are locally manufactured, which supports job creation, and the remainder are manufactured offshore to ensure quality and timely delivery to our regional markets. We work with international suppliers to obtain the best quality components for our set-top boxes, while driving a sustainability agenda. As one of the few physical items that we design, procure from third parties and sell, we celebrate the fact that our set-top boxes are made largely from recyclable components. While our decoder packaging is currently recyclable, we are taking steps towards more environmentally friendly biodegradable packaging or, where feasible, plastic-free packaging. This year, the launch of the Explora Ultra, despite the impact of COVID-19 and associated lockdowns, is testament to our strong supplier partnerships. We spent close to two years collaborating with our suppliers to build the new state-of-the-art set-top box and are pleased to announce that it was awarded the TV Gadget of the Year by Stuff magazine, beating offerings from other global technology giants.

Transmission and transponders

It is imperative that we distribute content to our customers, which makes third-party signal transmission via leased satellites and other supporting infrastructure a critical part of our core traditional linear pay-TV services. Our satellite lease agreements are long-standing and operate seamlessly, while other content delivery networks and telecommunications partners have become increasingly important in a growing online media environment. We continue establishing and developing relationships and partnerships in this area.

Irdeto

The various agencies, installers and payment partners, who are spread across our footprint, deal with varying aspects of our business, such as decoder sales, dish installations and processing payments. We provide continuous support through access to our systems and training to ensure excellent customer service. Through our partnership model, we have built an extensive third-party payment network across Africa, comprising integrations with 39 vendors in South Africa and 161 vendors in the Rest of Africa, including many large retail chains.

Critical systems

We rely on several critical systems to run our business, covering operational aspects such as subscriber management systems (e.g. customer relationship management, billing and payments), and corporate functions such as accounting, finance and HR. Some of these systems are developed in-house, but many are licensed from or outsourced to third-party vendors. We work closely with these suppliers to ensure the quality and continuity of service, while protecting customer information, managing costs, and ensuring system flexibility and scalability.

Agency, installers and payment partners

As a 100% group-owned company, Irdeto provides critical services to the MultiChoice video entertainment businesses, most notably in areas such as conditional access services, middleware for hardware, digital rights management, and anti-piracy services. There is a naturally close working relationship between MultiChoice and Irdeto, with the latter assisting the former to remain at the forefront of technological innovation. In turn, Irdeto relies on specialised technical service and manufacturing partnerships to deliver its highly specialised products and services to both MultiChoice and Irdeto’s external client base.

Transforming our supply chain

We have procurement programmes across our footprint, aimed at fostering and supporting local, new and previously disadvantaged business owners in the film, TV, media, and information and communication technology (ICT) industries. In South Africa, for example, our preferential procurement programme supports the development of SMMEs who play a critical role in creating jobs. Our preferential procurement spend was ZAR11.5bn in FY21, 81% of which was with BBBEE compliant suppliers. Of this spend, ZAR3.3bn was directed at SMMEs, and ZAR2.3bn went to suppliers with at least 30% black women ownership. In South Africa, we established the MultiChoice Enterprise Development Trust in 2012 to support and grow start-ups and small enterprises.

More details on the Enterprise Development Trust, can be found in Value created for society and the environment.

Issues raised by suppliers

How we address them

Issues raised by suppliers

1

How the group is adapting to the rise of OTT OTT services created disruptive changes in the traditional linear pay-TV landscape, notably in developed markets where broadband penetration, speeds and affordability sufficiently support the scale take-up of these services. This impacts traditional suppliers, including content producers, satellite transmission systems providers and set-top box manufacturers, among others.

How we address them

Satellite and DTT are likely to remain the most cost-efficient methods of distributing long-form video content to the mass market across Africa for some time to come. We expect to continue collaborating with our current suppliers for the foreseeable future. However, we see OTT as an area of continued growth as connectivity across the continent improves, bringing with it scope for new partnerships to emerge. We are embracing this change, as evidenced by our continued investment in our own OTT services and platforms, and recent transactions with two major SVOD providers.


Issues raised by suppliers

2

MultiChoice’s cost savings agenda
and the impact on suppliers
MultiChoice has embedded an aggressive cost savings culture into its business to ensure fit-for-purpose operational efficiencies. This can create an environment of uncertainty for some suppliers who fear that their services may be reduced or terminated.

How we address them

Driving cost efficiencies across our business is an important part of our commitment to deliver positive operating leverage. However, we recognise the value and importance of mutually beneficial supplier relationships. Thus, we will pay a fair price for services that add value to our business when it makes sense economically. Where content or services are not performing in line with expectations, we hold conversations with suppliers to decide if these services may require termination or revision. Ultimately, we believe our approach to suppliers is firm but fair and conducted in the spirit of collaboration and mutual sharing of risks and benefits.


Key focus areasgoing forward
  • Looking ahead, we will continue investing in local content and sourcing world-class entertainment from our international partners.
  • We will continue engaging with sporting bodies to deliver excellent sport to our viewers.
  • We will aim to secure relevant contracts that come up for renewal, and wherever possible negotiate the sharing of foreign currency risk with our suppliers and partners.
  • We will proactively pursue opportunities for new or enhanced partnerships, especially for co-productions, payments and expanding our entertainment ecosystem.
  • We will continue developing our ecosystem by expanding our products and services through ongoing innovation, strategic partnerships and select investments to provide customers with a wider array of complementary entertainment options and value-added services.
  • We will continue driving transformation through our supply chain responsibly and sustainably.
  • Finally, we are in the process of a hardware refresh cycle for our IT systems, as well as implementing a new system to futureproof our customer service, billing and data capabilities. We will focus on successfully implementing these projects with the assistance of our service providers.