How MultiChoice Group CEO Calvo Mawela is taking on Netflix and Amazon

MultiChoice has successfully unbundled from Naspers and is now a standalone entity.

MultiChoice Group, the pay-TV business that Africa’s largest technology company Naspers unbundled, embarked on an initial public offering (IPO) on February 27. Its debut on the Johannesburg Stock Exchange gave it a market capitalisation of R45 billion.

MultiChoice is the operator of pay-TV business DStv – equivalent to cable-TV in the United States. South Africa is MultiChoice’s largest pay-TV market. It has a penetration rate (as a percentage of total households) of 41 percent in South Africa, followed by Angola (31 percent), Zambia (20 percent), Nigeria (17 percent), Kenya (14 percent) and 9 percent for other countries on the continent.

MultiChoice’s IPO comes at a time when time when it faces heightened regulation in South Africa and the proliferation of international streaming services such as Netflix and Amazon Prime Video that are targeting its premium customer segment.

MultiChoice CEO Calvo Mawela (pictured left) talked to Mergers and Acquisitions (M&A) Africa about how the company will defend its market position after the IPO and its plans to grow the number of its pay-TV subscribers threefold by 2022.

 

M&A Africa: Now that MultiChoice is now a publicly traded entity, the company can raise capital with investors. Where will the company deploy its future investments?

Calvo Mawela: We think we still have great opportunities in the traditional pay-TV business, which is still under penetrated in Africa. This gives us the opportunity to double down on our efforts to make sure that we capture the market.

On the "internet" or over-the-top (OTT) side, we know that people are interested in online content and we will continue to invest in our streaming services like Dstv Now and Showmax. We won’t rest on our laurels because the costs in the OTT segment are too high and it is an under-penetrated market. In our view, we want to own the habit of consumers of consuming content online.

M&A Africa: Is the pay-TV market strong despite the proliferation of online streaming services like Netflix and Amazon Prime Video?

Calvo Mawela: We still believe we have a good run in terms of traditional pay-TV. We think there is still an opportunity for us to grow the business, especially in the middle-to-mass market. However, we are taking Netflix seriously as they are in the market. However, our research shows that in South Africa, seven out of ten people have a Netflix subscription in addition to a DStv subscription.

People want great content online.  What we need to do is produce and deliver good content to our subscribers. Yes, competition is increasing and intensifying but we think we should be able to do better than the likes of Netflix, who are just focused on video-on-demand content. We not only have content, but we have sports, local content, news on our platform, which people want to see.

M&A Africa: MultiChoice wants to grow the number of its subscribers across the African continent excluding South Africa to 44 million by 2022. It currently 14 million subscribers. How will you get there?

Calvo Mawela: How quickly we will get there depends on the amount of investments required to get to those people and the logistics of getting to the market at a much faster pace. All we need to grow in the continent is a point of presence, money and debit order structures for our customers as in some countries there are no debit order structures. We already have exposure in markets such as Nigeria, Angola, Zambia and Kenya. We can grow in those existing markets.

We are focused on the business. We believe it has huge potential. That way, we will be able to get to the 44 million subscribers quickly. There is great opportunity and we see it.

M&A Africa: Is there an amount for capital expenditure (capex) set for this growth?

Calvo Mawela: We do not disclose to that level. We have a capex that is stable year-on-year. We don’t think there is a huge need for investments. We have already signed our biggest investment.  We have satellite responders in many African countries, we already have the digital terrestrial television network in the eight African countries that we are in. Our investment is already sound, there is no bigger infrastructure investment that is required. We only need to invest in IT and artificial intelligence.

M&A Africa: What are MultiChoice’s growth targets for its streaming services DStv Now and Showmax?

Calvo Mawela: Because both services are internet-based, we would like to see growth come in as quickly as possible. We are working hard to improve the user experience. That is why we will double-down on our investments in those areas to improve our offering and product.

M&A Africa: You were vocal about the need to regulate Netflix in South Africa as MultiChoice is heavy regulated by the government. Has there been developments on your call for regulation?

Calvo Mawela: The positive development is that Netflix is now paying Value Added Tax in the country. We have always pushed for Netflix to pay taxes in South Africa. The are other issues that need to be worked out such as Netflix growing employment through the production of local content. There must be regulation. You can’t have traditional pay-TV being heavily regulated while the OTTs are not regulated.