Canal+ takes on Netflix in Africa with $3bn bet on satellite TV

Dozens of satellite dishes are dotted up the walls of a tall, red-brick apartment block in Hillbrow, an inner city district in Johannesburg.

“Everybody is a [satellite television] subscriber,” explains Bongi Mahlangu, a resident of the building who has two jobs as a cleaner.

“I will never not have it. It keeps my two children off the streets after school. Then at the end of the day, it helps me relax,” she said.

While US streaming services have upended TV markets across the western world, they have yet to have the same impact in Africa, where the provision of reliable internet is patchy.

Canal+ is betting big that old fashioned pay TV will dominate the African market — and hold off the US streamers — for years to come.

The French media company this month finalised the takeover of MultiChoice, Africa’s largest pay-TV company, in a $2.9bn deal that Canal+ hopes will boost its ambitions of becoming a global media company that can go toe to toe with Netflix.

“Satellite enables you to reach 100 per cent of the population [in Africa],” Maxime Saada, chief executive of Canal+, told the Financial Times in an interview last month. The French broadcaster’s conviction on the scale of opportunity in Africa resulted in it paying R125 per share for MultiChoice — a 66 per cent premium.

Satellite TV still has unmatched reach in many African markets, especially in lower-income households where high data costs and patchy connectivity have impeded the take-up of streaming services. In June Canal+ agreed a deal with Netflix to distribute its movies and box sets to its subscribers in 24 countries across Sub-Saharan Africa.

Africa’s satellite TV market is forecast to grow by almost a third to 55mn subscribers by 2029, according to an annual report by Digital TV Research.

But some observers believe that it is a matter of time before the likes of Netflix, Apple and Disney come to dominate the African market.

“Doubling down on satellite in a world where streaming is everything is a risky strategy,” said Peter Takaendesa, chief investment officer at Johannesburg-based asset manager Mergence, who added that investing in Africa had not delivered for companies across different sectors. 

“The reality is people have been talking about Africa’s growth opportunity for a decade, and hardly anyone has been able to capitalise on this in hard currency,” he said.

Canal+ executives are hoping the MultiChoice deal will draw a line under a difficult start to life on the London stock market by giving investors more clarity on the group’s prospects. Ten months after floating in London, Canal+ is valued at £2.4bn — about a third of what analysts had expected.

The deal hands Canal+ an additional 14.5mn subscribers, adding to its existing base of almost 27mn subscribers in 52 countries.

It will benefit from MultiChoice’s broadcast rights for the English Premier League, the Champions League and Formula 1, providing a point of differentiation to US streaming services. The network’s new owner intends to bolster its offerings of African-language programmes, some of which have become hit cult shows in recent years.

“The greatest stories that haven’t been told are from Africa”, but it has lacked the resources to tell them, Saada said.

Despite satellite TV’s broad reach, MultiChoice’s recent results show South African consumers are cutting the cord amid a squeeze on living standards and an unemployment rate in excess of 30 per cent.

In March the company reported that over the past year the number of active satellite subscribers in South Africa — which accounts for about half of MultiChoice’s subscribers — had fallen by 8 per cent to 7mn. Price increases meant organic revenue grew by 1 per cent last year.

Saada is choosing to look through prevailing challenges and focus on what he describes as Africa’s “amazing” demographic trends. In the markets Canal+ operates in on the continent, the population is forecast to grow to 2bn by 2050, up from 1.2bn people today.

On top of that, healthy economic growth and increasing electricity connectivity will also bolster subscriber numbers, Saada said. Almost 50 per cent of residents in Sub-Saharan Africa still do not have electricity access, according to the International Energy Agency.

But streaming services also stand to benefit from those trends. Last year, Netflix announced plans to expand its operations in Africa, where it has largely focused on South Africa, Kenya and Nigeria, all three of which are English-speaking and have a sizeable middle class.

While Saada is primarily focused on pay TV, MultiChoice also owns a majority stake in Africa’s largest streaming platform Showmax. Bloomberg reported this month that Canal+ is considering buying out the 30 per cent stake it does not own from Comcast.

Despite this apparent desire to take full control of a streaming platform, Saada told the FT that such services will continue to be hamstrung by inadequate broadband provision in Africa.

“[They] will not set up satellite operations, it’s just not in their capability,” he said. “So they have to wait until broadband penetrates [further] and in the meantime we can deliver.”

Additional reporting by Daniel Thomas in London