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MultiChoice South Africa Holdings Proprietary Limited
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Integrated annual report 2017
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OPERATIONAL REVIEW
(CONTINUED)
ECONOMIC ENVIRONMENT
Changes in the economy, such as exchange
rates, in ation, interest rates and/or
unemployment levels can in uence our ability
to create value. While outside our direct control,
we can mitigate some of the potential impact of
market movements through our hedging
strategies.
Uncertainty over economic policy continued
to affect growth during 2016 and ultimately led
to Fitch Ratings downgrading South Africa’s
sovereign rating from investment grade to junk
on 7 April 2017, following a similar move by
S&P Global Ratings on 3 April 2017.
The outlook for the South African economy
further deteriorated on the back of lower
commodity prices, higher borrowing costs and
diminished con dence. Currency weakness is
putting upward pressure on in ation and the
agriculture sector is suffering the effects of a
severe drought.
With the economy under signi cant pressure
from various sources, our customers’ ability and
propensity to spend is strained. The impact on
the group is exacerbated by the signi cant
deterioration in the South African rand exchange
rate against the US dollar and euro, the base
currencies for our content.
REGULATORY
The highly regulated video-entertainment
industry in South Africa has become more
complex with several policy reviews under way
and an inquiry by the sector regulator. Our
strategy formulation and implementation are
affected by regulatory developments, including
the communications ministry’s review of the
broadcasting sector, proposed amendments
to copyright legislation and the Film and
Publications Act. In addition, the Independent
Communications Authority of South Africa
(Icasa) is conducting an inquiry into the state of
competition in the broadcasting sector. Matters
before competition authority remain a key focus
and they, together with regulatory complexities,
are placing increased demands on senior
management time.
Risk management is integrated into operations
and focuses on achieving objectives
underpinning our strategy. The control
framework to manage evaluated risks operates
effectively.
COMPETITION
The video-entertainment environment is
becoming increasingly crowded and our
competitive landscape continues to shift, both in
the traditional TV market and the over-the-top
(OTT) environment (ie online video-on-demand).
This year saw further launches of OTT players in
the South African market, notably Amazon
Prime in addition to Net ix. Local network
owners have launched their own on-demand
services, to boost the use of data on their
networks.
Key challenges include:
Ò
Increased disruption of the traditional
direct-to-home (DTH) market by competitors
offering both existing and new content
platforms.
Ò
Sport rights are increasingly sought after and
becoming more expensive.
Ò
Aggressive competition for top international
content rights.
External environment: Economic, regulatory and competition