As inflation drives food, fuel, and electricity prices ever higher, has Multichoice Group—facing its own challenges—reached the same breaking point that pushed Pick n Pay, Shoprite and Mr Price out of Nigeria?
The recent announcement from Multichoice Group revealing the loss of 243,000 Nigerian subscribers across its DStv and GOtv services is a stark reminder of the challenges facing businesses operating in Nigeria. This marks a dramatic six-month shift from April to September 2023, in which Multichoice blamed record-high inflation, now exceeding 30%, as the primary reason for the downturn.
This news, outlined in the company’s Interim Financial Results for the period ending September 2023, highlights Nigeria’s ongoing economic woes, which have left consumers struggling to afford essentials, much less entertainment services. With food, electricity, and fuel prices soaring, Nigerians appear to be tightening their budgets and dropping non-essential expenses like DStv and GOtv subscriptions.
This isn’t the first time Multichoice Nigeria has found itself at odds with the economic conditions in the country. In a span of just twelve months, the company increased prices on its DStv and GOtv packages three times—first in April 2023, again in November 2023, and a third time in May 2024.
These frequent price hikes were in response to mounting operational costs, though they ultimately placed a strain on subscribers already facing financial hardship. The last price increase, effective May 1, came even as the Competition and Consumer Protection Tribunal (CCPT) in Abuja issued a temporary restraining order against it.
This order was based on a complaint from a Nigerian consumer, arguing that the increases placed an unfair burden on subscribers. However, Multichoice proceeded with the price hike, which led the Tribunal to impose a N150 million fine on the company for defying its mandate and challenging the court’s jurisdiction.
Multichoice’s losses aren’t limited to Nigeria. In Zambia, the company cited power outages—lasting up to 23 hours a day due to severe drought—as a major factor behind a significant decline in subscriptions there as well. These events illustrate a growing challenge for Multichoice’s operations across Africa, where economic instability, inflation, and infrastructure challenges are threatening the viability of subscription-based entertainment services.
Multichoice’s losses in the Rest of Africa were notable, with a 15% drop in subscribers year-on-year, significantly impacting the Group’s overall revenue.
In an effort to mitigate these pressures, Multichoice has implemented several strategies. The company cut decoder subsidies by ZAR 0.4 billion across South Africa and the Rest of Africa, and ramped up cost optimisation, achieving ZAR 1.3 billion in savings.
Showmax, the company’s streaming service, saw a 50% increase in paying subscribers year-on-year, offering a glimmer of hope for its digital pivot. Despite these gains, Multichoice’s trading profit still declined 46% due to currency depreciation and other macroeconomic factors, highlighting the uphill battle in sustaining profitability in this economic landscape.
While Multichoice’s future in Nigeria remains uncertain, parallels can be drawn to the exits of South African retailers Pick n Pay, Shoprite, Mr. Price, and Woolworths, who left the Nigerian market in recent years due to similar economic pressures.
The company’s financial health is further compounded by foreign exchange rate losses in Nigeria and the wider region, leading to a negative equity position of ZAR 2.7 billion as of the close of the period. Although Multichoice has reassured stakeholders that liquidity remains stable, questions linger about whether the company can maintain its Nigerian operations amid sustained consumer pressure.
Given these developments, Multichoice Group may face some tough decisions regarding its Nigerian market strategy. If inflation and exchange rate instability persist, more African markets could prove unsustainable, potentially forcing the Group to make a drastic shift or, as seen with other companies, consider a full exit from markets that no longer provide a reliable customer base.
For now, Multichoice is holding on, hoping that cost-cutting measures and its foray into digital streaming will cushion the impact. The coming months will reveal if these efforts are enough to sustain its position in Nigeria or if the pressures will lead to a retrenchment in the region.
