French media group Canal+’s growing investment in SA’s MultiChoice has set off speculation of deeper ties between the two companies.
Canal+, the pay-TV subsidiary of media conglomerate Vivendi, says the acquisition of the 6.5% stake, now worth R3.2bn, is a long-term investment, underscoring its confidence in the prospects of MultiChoice and Africa.
Peter Takaendesa, head of equities at Mergence Investment Managers, agrees: "This is a significant vote of confidence in MultiChoice’s business model by such an experienced media operator."
The Canal+ stake makes it MultiChoice’s top foreign shareholder, after local institutions the Public Investment Corp, Allan Gray and Prudential Portfolio Managers.
The French group has apparently been buying shares since April, according to Ian Woodley, an analyst at Old Mutual Investment Group.
It had to make a public announcement "only because it went over the 5% threshold", he says.
According to the Companies Act and the JSE’s regulations, investors have to give notice when they acquire more than 5% of the issued shares in a company.
"Obviously Canal+ has not gone public with its intentions, but it seems logical that it wants to do something with MultiChoice rather than just take a position because it thought the stake was ‘cheap’," says Woodley.
MultiChoice has about 19.5-million customers across Africa and recent deals with Netflix, Amazon Prime Video and ESPN would indicate that the Randburg-based company is considered key for international players looking to gain a foothold on the continent.
Dobek Pater, director and analyst at ICT research firm Africa Analysis, says Canal+ "is obviously confident in MultiChoice’s new strategy of competing against global content providers that have entered — and will continue to enter — SA and other markets in Africa."
Canal+ owns a large number of channels including a TV channel in Nollywood, Nigeria’s Bollywood. It distributes television content in West African countries including Sierra Leone, Nigeria, Ghana and Cape Verde. MultiChoice owns a satellite television network in Nigeria and produces a lot of content there as well.
"This is a potential collaboration model which enables Canal+ to distribute its French channels across all other African countries with French language," says Roman Magis, principal director for video, advertising and content at Accenture Africa.
Woodley agrees, saying the possibility exists that Canal+ "sees some benefit from rationalisation of its assets with MultiChoice in various territories, be it from a competitive or from a complementary point of view".
He says MultiChoice is not very big in Francophone Africa, so this could be where Canal+ and the DStv operator may see some benefits.
But, says Woodley, "it’s unclear why Canal+ would need to take a shareholding in MultiChoice to push this agenda".
Takaendesa says though Canal+ is unlikely to be as dominant in MultiChoice as former parent company Naspers was, "we believe there is potential for Canal+ to increase its shareholding further to become an influential minority shareholder in MultiChoice".
One possible obstacle is that there are restrictions on foreign control of local media assets, and black ownership of MultiChoice SA has to remain in place, Takaendesa points out.
"But there is still room for Canal+ to increase its shareholding before those requirements become a constraint."
The Electronic Communications Act restricts foreign ownership of local broadcast firms to 20%. If Canal+ does seek to become a bigger investor, it is likely that separate deals would have to be struck for MultiChoice SA.
It’s not as if MultiChoice isn’t already partially foreign owned: at the end of its last financial year, the group’s foreign investor base was already 35%.
"Canal+ parent Vivendi has significant minority shareholdings in other assets outside France and the MultiChoice investment could be following the same approach, at least for the foreseeable future," Takaendesa says.
He reckons the broader message from this and other recent transactions — such as the PepsiCo/Pioneer Foods, Zahid/Barloworld deal — is that international long-term investors "are finding SA assets attractive despite the economic challenges the country is facing, and there is potential for significant capital inflows if major structural growth constraints are addressed".
International players such as Netflix have started investing in locally produced TV productions in Africa, including the launch of SA’s Queen Sono and Blood & Water in the past year.
In the music industry, Warner Music recently bought into Africori, said to be the largest digital music distribution company in Sub-Saharan Africa. Downtown, which administers works by artists including The Beatles, has bought Joburg-based music company Sheer Publishing.
And Universal Music has launched Def Jam Africa, with a number of SA and Nigerian artists on its roster.
The jury is out as to whether MultiChoice’s best days are behind it, given the proliferation of online streaming, a legacy business model tied to satellite dishes, battered African economies and Covid-hit incomes.
But even with their much deeper pockets, global players like Netflix and Amazon have failed to gain traction in Africa as DStv has done. It may be that MultiChoice will act as the gatekeeper that global video entertainment companies have to go through to make their mark on the continent.