South African conglomerate, Naspers, has completed the listing of MultiChoice, Africa’s biggest pay TV provider. MultiChoice’s shares were listed on the Johannesburg Stock Exchange in the early hours of Wednesday.
The company’s listing opened with a share price of 95.50 rand ($6.89). This gives the company a market capitalization of 42 billion rand ($3.03 billion). However this is 50% short of its rumoured pre-listing valuation, which was put at around $6 billion.
“We are happy with where the share opened and how it is trading. We expect it [share price] to settle down in the next three months,” says MultiChoice Chief Financial Officer Tim Jacob.
Meanwhile, analysts in South Africa predict that the company’s share price will soar, enough to put it on the JSE top-40 Index. Many are predicting a valuation of between 50 rand and 90 rand. Bloomberg also predicts its value will reach $5 to $6 billion.
“Today is a proud day for Naspers,” says Naspers CEO, Bob van Dijk. “Listing 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 top-40 JSE-listed African entertainment group.”
According to MultiChoice Group CEO, Calvo Mawela: “Today’s listing is an important milestone in our exciting journey of growth. As 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.”
Naspers spins off African pay-TV unit MultiChoice at an initial valuation of about 42 billion rand ($3 billion), enabling the continent’s biggest company to focus on its current incarnation as a global internet-technology firm https://t.co/HlZxtVlGok via @technology
— JasonNjoku (@JasonNjoku) February 27, 2019
MultiChoice’s IPO had been the talk of the town after Naspers announced the move in September 2018.
After over 20 years of steady growth and high revenues, MultiChoice appeared to be a dominant player in the African TV market. However, its slow push into the digital space opened doors for new rivals to enter and disrupt its business. And one of these new rivals is Netflix.
Although MultiChoice boasts 14 million subscribers across Africa, it reached this tally after 26 long years. Meanwhile, Netflix, which launched its presence in Africa in 2016, took just two years to reach 400,000 subscribers.
"By MultiChoice's own estimate they think there are about 400 000 Netflix subscribers in South Africa and I think many of those are also DStv subscribers."
— Duncan McLeod, Founder and Editor at Techcentralhttps://t.co/MiALpxeBeJ
— 702 (@Radio702) November 26, 2018
So the competition in this arena was going to be tough going forward. But, apparently, Naspers is reluctant to pursue this battle. It announced its exit in September 2018, and further announced it would transfer its MultiChoice shares to current Naspers shareholders. As a result, Naspers itself did not make any money from MutiChoice’s IPO.
Nevertheless, the split from Naspers may not necessarily be a bad thing for MultiChoice. The company is still growing, albeit slowly. And it will be looking to spend heavily on growth plans to reach more users. With its ownership of exclusive sporting, movie and other local content, MultiChoice will remain huge for a long time.