MultiChoice set the stock market ablaze, leaping 16 percent from its debut of R95 a share on the JSE as the Independent Communications Authority of South Africa (Icasa) raised concerns that the listing had gone ahead despite complaints before the Complaints and Compliance Committee (CCC).
Icasa, the communications regulator, said Khulisa, a non-governmental organisation, had flagged that the listing would result in contravention of section 13(1) of the Electronic Communications Act, which states that an individual may not get a licence without prior permission from the authority.
“Icasa is indeed concerned that the listing seems to be going ahead while the CCC is still considering representations that were made and is yet to make its final recommendations on the matter to the council of the authority,” Icasa said.
MultiChoice, which is flying solo after being spun off media and technology giant Naspers, shrugged off the concerns to jump to R106.01 a share to value the company at R46.5 billion.
Analysts, however, pointed out that the shares had underwhelmed the market.
Richard Hasson, the co-head of Cape Town-based Electus Fund Managers, said the debut price was at the lower end of market valuations.
“The key reasons being the potential share overhang from those Naspers shareholders that are not long-term holders of a pay-TV business, the uncertainty around the ability of management to turn around the African loss-making businesses, especially in Nigeria, and the continued erosion of the premium subscriber base in South Africa,” said Hasson.
The group has previously said that it was looking at reviewing prices to make content affordable to more consumers, among other things, as part of a strategy to return its loss-making rest-of-Africa operations to profitability.
Naspers, which accounts for 20 percent of the market capitalisation of the JSE, mainly through its share in Tencent, hived off MultiChoice and listed it as a standalone business after mounting pressure to unbundle some of its assets.
Junaid Bray, the head of equities at Cape Town-based Argon Asset Management, said MultiChoice traded below the lower end of analysts’ valuation range of R150 to R250 a share.
“The concern has been that foreigners who own Naspers mainly for the exposure to Tencent would sell their shares in MultiChoice, as it is either outside of their mandates or deemed to be insignificant.
“Naspers’ weight in the JSE indices is not expected to change, while MultiChoice will have a significant weight,” said Bray.
MultiChoice, which was known as a cash cow for Naspers, hoped the listing would create a leading entertainment business that was profitable and highly cash-generative.
Naspers chief executive Bob van Dijk said the listing would provide shareholder value.
“Listing (the) MultiChoice Group through an unbundling unlocks value for Naspers shareholders by creating the opportunity for them to own a direct stake in MultiChoice Group, a Top40 JSE-listed African entertainment group,” he said
MultiChoice, which was founded in 1985, delivers content to 14million African households through its flagship product brand DStv, is to focus on being a global internet-technology firm.
MultiChoice chief executive Calvo Mawela said the listing was an important growth milestone.
Mawela said MultiChoice was one of the fastest-growing pay-TV broadcast providers globally.
“Our strong financial position at listing is backed by attractive long-term growth opportunities in both subscriber numbers and revenue. Multichoice has a highly cash generative core with no financial debt, and we are poised to deliver value to our shareholders over time,” said Mawela.
