MultiChoice: Navigating Stormy Waters in Africa's Pay-TV Sector – A Buying Opportunity or a Sinking Ship?

MultiChoice Group, Africa's dominant pay-TV operator, faces a perfect storm of subscriber erosion, currency volatility, and intensifying competition from streaming platforms. Its recent financials—highlighted by an 8% drop in linear TV subscribers in 2025 and a ZAR4.0 billion trading profit plunge—raise critical questions: Is the company's decline irreversible, or does it hold hidden resilience? Can its pending acquisition by France's Canal+ transform its prospects? And does its current valuation reflect an undervalued turnaround story or a risky bet on African markets?

Subscriber Decline: A Structural Shift or Temporary Setback?

MultiChoice's linear TV subscriber base has shrunk by 2.8 million since 2023, with South Africa alone losing 1.6 million subscribers since 2019. The mass-market segment, once its bulwark, has collapsed by 19% since 2022, signaling broader consumer disengagement. Key drivers include:
- Economic Hardship: Rising inflation, currency depreciation (notably in Nigeria's naira), and energy shortages (e.g., South Africa's load-shedding) have forced households to cut discretionary spending.
- Streaming Competition: Netflix's aggressive pricing, local streaming rivals, and social media's free content have eroded demand for bundled linear TV packages.
- Piracy: Illegal access to content has further dented pay-TV's appeal.

Opportunity in Transition: While linear TV declines, MultiChoice's streaming services are growing—Showmax's 44% subscriber surge and DStv Stream's 38% expansion—highlighting a path to recovery. However, these gains remain insufficient to offset linear losses. The company's bet on Showmax's relaunch (partnering with NBCUniversal's Peacock) could accelerate growth, but execution risks loom large.

Currency Pressures: A Persistent Headwind or Manageable Risk?

MultiChoice generates 43% of its revenue in foreign currencies (USD-denominated content rights), making it acutely vulnerable to African currency depreciation. Over two years, this exposure caused ZAR10.2 billion in revenue losses. Nigeria, its second-largest market, contributed 77% of Rest of Africa's subscriber losses, driven by a 40% naira devaluation in 2023–2025.

Mitigation Strategies:
- Cost Discipline: The company slashed ZAR3.7 billion in costs in 2025—nearly double the prior year—via operational efficiencies and reduced capital spending.
- Price Adjustments: A 5.7% South African DStv price hike and tiered pricing (e.g., lowering DStv Add Movies to ZAR49) aim to balance affordability and profitability.
- Currency Hedging: While not eliminating exposure, improved hedging practices have reduced volatility.

The Canal+ Acquisition: Silver Bullet or Overvalued Gamble?

France's Canal+ Group plans to acquire MultiChoice for ZAR125 per share in cash, valuing the business at ZAR20.7 billion (USD ~1.1 billion). The deal, expected to close by October 2025, offers two key advantages:
1. Stabilizing Capital: Canal+'s deeper pockets could fund MultiChoice's streaming investments without relying on strained cash flows (2025 free cash flow: ZAR0.5 billion outflow).
2. Content Synergies: Access to Canal+'s global content library and tech infrastructure could bolster Showmax's competitiveness against Netflix.

However, risks remain:
- Regulatory Hurdles: South Africa's Competition Commission may scrutinize the deal's impact on market concentration.
- Integration Challenges: Merging operations across 45 African markets could strain management bandwidth.
- Valuation Concerns: At 0.3x EV/Sales (vs. Netflix's 1.8x), MultiChoice's valuation reflects extreme pessimism—but is it justified?

Valuation: Discounted for Disaster or a Bargain?

MultiChoice's shares trade at 0.2x P/B and 4.2x P/E (adjusted for 2025 losses), suggesting investors expect further deterioration. Yet, its 2025 cost savings and streaming growth hint at a stabilization path. Key catalysts to watch:
1. Canal+ Deal Completion: A “yes” unlocks access to capital and synergies; a “no” risks deeper losses.
2. Streaming Growth: If Showmax's 2026 subscriber targets (e.g., doubling its current base) are met, the company could pivot to profitability.

Investment Thesis: Buy the Dip or Avoid the Sinking Ship?

Bull Case:
- Canal+ closes the deal, injecting liquidity and strategic direction.
- Streaming services grow 50%+ annually, offsetting linear losses by 2026.
- South African ARPU stabilizes at ZAR290+, supported by price hikes and retention campaigns.

Bear Case:
- Subscriber declines accelerate due to worsening macroeconomic conditions.
- Canal+ abandons the bid, leaving MultiChoice to fund its turnaround alone.
- Showmax's content partnerships fail to counter Netflix's dominance.

Verdict: MultiChoice's shares currently price in a worst-case scenario. While risks are substantial, the Canal+ bid and streaming turnaround potential create an asymmetric opportunity. Investors with a 3–5 year horizon and tolerance for African market volatility could initiate a small position, scaling in if the deal clears regulatory hurdles. However, those focused on short-term stability should avoid until operational metrics stabilize.

Final Word: MultiChoice is a company at a crossroads. Its ability to navigate currency storms, outcompete streaming rivals, and execute the Canal+ deal will determine whether its undervalued shares become a profitable contrarian bet or a cautionary tale of declining relevance in Africa's entertainment landscape.

Data as of June 2025. Past performance does not guarantee future results. This analysis is for informational purposes only and not a recommendation to buy or sell securities.