MultiChoice, the South-African pay-TV and technology company witnessed a sharp decline in its share price following a downgrade in its rating by JP Morgan Chase & Co. Its shares were trading down 11.73% at 12:27 GMT, after falling around 12% in early trade.
The brokerage firm, according to Reuters, revised MultiChoice’s share rating from “neutral” to “underweight”. This indicates an expectation of underperformance compared to other stocks in its coverage universe over the next six to 12 months which affected the share price. Consequently, this recommendation implies that investors should consider selling their stock in the company.
The company was downgraded as J.P. Morgan believes it intends to “throw considerably more money at Showmax than what the market expects,” according to Casparus Treurnicht, a portfolio manager at Gryphon Asset Management.
The downgrade resulted in a noticeable impact on MultiChoice’s share price during Tuesday’s trading session. The stock opened at N3907 (ZAR94.76) but experienced a substantial drop in its share to N3401 (ZAR82.49) by 16:25, representing a reduction of nearly 13%.
Read also: Multichoice generated N277 billion from operations in Nigeria in one year
Reasons for JP Morgan’s share rating
JP Morgan’s decision to downgrade MultiChoice’s rating was influenced by its belief that the company intends to allocate a significantly larger sum of money to Showmax than what the market anticipates. As MultiChoice competes against global players such as Netflix, Disney+, and Amazon Prime Video, it has already invested billions in Showmax to enhance its market position. However, Netflix and Amazon Prime Video, in particular, have been investing heavily in producing local original content, which has been a key strategy for Showmax.
Furthermore, MultiChoice faced another setback when it was revealed that Amazon successfully poached one of its top executives to lead its operations in South Africa. This loss of talent raises concerns about MultiChoice’s ability to navigate the competitive landscape effectively.
In its pursuit to strengthen its video streaming offerings, MultiChoice recently entered into a partnership with Comcast’s NBCUniversal and Sky, forming the new Showmax Group. This collaboration involves migrating the Showmax app to the underlying technology of Comcast’s successful Peacock streaming service, which has amassed over 20 million subscribers in the United States.
MultiChoice’s increased investment in Showmax was one of the contributing factors behind the reported R2.9 billion loss for the financial year that ended in March 2023, leading to the company’s decision to withhold dividend payments to shareholders.
MultiChoice’s declining share price, coupled with JP Morgan’s downgrade, highlights the challenges the company faces as it seeks to compete in the evolving pay-TV and streaming industry.
MultiChoice hikes DStv prices three times in Kenya in less than a year
MultiChoice, the operator of DStv and GOtv in the Kenyan market, announced a forthcoming price hike for its services, set to take effect on August 1, 2023. This will be the third price adjustment within a year, and it is expected to elicit strong disapproval from users who are already discontent with the company’s pricing strategy.
Under the new pricing structure, DStv Premium subscribers will face a monthly fee of KES 9900 ($70), up from the previous cost of KES 9500 ($68). Compact Plus subscribers will see an increase to KES 6200 ($44) per month, compared to the previous rate of KES 5900 ($42). Family and Access package subscribers will also experience price hikes, with monthly fees rising to KES 1850 ($13) and KES 1300 ($9) from the previous charges of KES 1750 ($12) and KES 1250 ($8.8), respectively.
GOtv users will also be affected by the price adjustments. The SUPA plan will now cost KES 1900 ($13.5), up from KES 1750 ($12), while the Max tier will be priced at KES 1450 ($10.3), an increase from KES 1350 ($9.6).
Read also; MultiChoice launches Moment to expand payment infrastructure for Africans
This latest price hike comes less than a year after MultiChoice faced significant backlash for previous adjustments to its pricing plans. Users, particularly sports enthusiasts, expressed frustration as MultiChoice holds a dominant position in sports streaming in Kenya, leaving them with limited alternatives to access live games other than through DStv’s satellite signals. The company has long been criticized for its high package prices, and these recurrent price increases have added to the dissatisfaction of Kenyan subscribers.
MultiChoice Kenya has attributed these changes to high inflation and operating costs, a rationale commonly cited by companies in Kenya. However, customers remain skeptical of the justifications provided.
Technext Newsletter
Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!
