MultiChoice, Canal+ deal will help fend off Netflix threat

MultiChoice Group has agreed to work closely with Canal+ to facilitate a mandatory offer that, if successful, will see the French broadcasting giant buying out the South African broadcaster.

According to a joint statement released by the two companies on Monday, the merger is seen by both as a strategic move that will “build a global entertainment leader with Africa at its heart”. Even with both companies now singing from the same hymn sheet, however, getting the deal across the line could still prove exceptionally difficult.

“A combined group would be better positioned to address key structural challenges and opportunities resulting from the progressive digitalisation and globalisation of the media and entertainment sector,” MultiChoice and Canal+ said.

Canal+ believes it can provide MultiChoice the scale it needs to fend off the challenge posed by its US rivals

Africa is viewed by many as the next frontier in global broadcasting. As internet adoption rates rise in tandem with living standards across the continent, the race is on to capture market share among a population that is expected to reach 1.6 billion by 2030, according to the United Nations.

In the joint statement, Canal+ said competition for the burgeoning African market comes from large multinationals such as Netflix, Google’s YouTube and Walt Disney Co’s Disney+. Canal+ believes it can provide MultiChoice the scale it needs to fend off the challenge posed by its US rivals, something that would complement the South African broadcaster’s longstanding boots-on-the-ground advantage across Africa.

The scale Canal+ offers to MultiChoice is significant. As of December 2023, Groupe Canal+ reported revenues of €6.1-billion (R123-billion at the current exchange rate) with a customer base of 26.4 million people, 17 million of whom are outside its home country of France.

Regulatory hurdles

But added scale would not only empower MultiChoice in its ability to make bolder moves – its distribution profile would get larger, too. MultiChoice has a strong content creation business with a big focus on localised content. Joining forces with Canal+ would expose the South African broadcaster to markets across Europe, Africa and Asia.

“MultiChoice would benefit from the combined group’s scale across its entire footprint,” the two companies said. “This could have significant benefits for the African creative and sports ecosystems, for example, by enabling high-quality content created on the continent to be distributed to an international audience.”

Read: Canal+ and MultiChoice join hands in takeover deal

Growth in distribution channels for MultiChoice would be accompanied by the availability of skills across the Canal+ ecosystem, which range from content creation to marketing and technical platform-centric competencies.

However compelling the rationale for joining forces may be, questions about how the two companies plan to overcome a number of regulatory hurdles remain unanswered. The two major stumbling blocks are broad-based black economic empowerment regulations and rules around the foreign ownership of broadcasting entities.

On the B-BBEE front, Bloomberg News recently reported that Patrice Motsepe’s African Rainbow Capital could join the bid by Canal+ to buy MultiChoice Group.

Canal+ has also pledged to honour other BEE initiatives by MultiChoice, including its internal transformation efforts and the Phutuma Nathi drive. However, details about how the foreign ownerships rules will be navigated are yet to be given.

“Canal+ and MultiChoice intend that upon successful implementation and completion of the transaction, the relevant entities within MultiChoice Group will comply with all applicable laws regarding economic transformation, B-BBEE and foreign ownership restrictions in the electronic communications sector and other regulated sectors in which MultiChoice operates. This includes the Electronic Communications Act.”

The ECA is the legislation that prohibit foreign entities from holding more than 20% of the voting rights of a South African broadcaster. – © 2024 NewsCentral Media

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