MultiChoice loses $108 million in Nigerian sports betting investment
By Kingsley Odii
MultiChoice has suffered a loss of R1.3 billion ($108 million) in its acquisition of a 49% stake in Nigeria’s sports betting company KingMakers over the span of three years.
Despite increasing its stake from 20% to 49% last year, Multichoice has seen a significant write-down in its investment due to the devaluation of Nigeria’s currency and expansion costs. The company’s stake in KingMakers, which was initially worth R5.9 billion ($393.5million), has now decreased to R4.6 billion ($248 million).
Financial markets analyst Jimmy Moyaha believes it is in MultiChoice’s best interest to save the struggling betting business rather than face potential asset impairment or significant loss from selling it. However, the company is already burning cash in most of its verticals, raising concerns among shareholders.
Speaking further about MultiChoice’s recent financial malaise, Moyaha said: “MultiChoice would not need to reinvent the wheel to take advantage of the market potential, especially given their overall presence on the continent. They would however need to remain cognizant of their competitors in the space. The key here would be that they would have to make a more compelling case than simply brand recognition to enter a somewhat saturated market.”
The KingMakers’ deal seemed promising on paper, as MultiChoice aimed to leverage its sports coverage to boost the betting business. However, expansion plans to Kenya and Ethiopia had to be halted, despite the appointment of new Chief Operating Officer Ronnie Whelan. KingMakers has experienced revenue growth, but losses have also increased due to investment and cash extraction losses in Nigeria.
The situation has caused concern for MultiChoice’s shareholders, who have already seen dividends withheld to fund another venture, Showmax.
If the situation does not improve, MultiChoice may face further impairments and potential write-downs, which would heavily impact the company’s non-current assets. Shareholders are also likely to be displeased, as KingMakers has already had the biggest negative impact on the group’s cash flows from investing activities.
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