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Naspers/DStv: “headwinds ahead”

Naspers, the South African conglomerate which owns the MultiChoice/DStv pay-TV business, has warned that the rest of this year and 2017 could see “headwinds” and stated that foreign currency falls throughout Africa and when programming was usually paid in US dollars, have hurt the company. “We can’t just pass on costs to our customers,” said Koos Bekker, chairman of Naspers, speaking at the company’s AGM on August 26th in Cape Town.

DStv suffered subscriber falls in the year to March. Bekker also said that this sector was under pressure from Google, Facebook and Amazon.

However, on the upside Naspers owns 33 per cent of Tencent Holdings, and it is this Chinese-focussed business which is generating almost half its revenues.

Tencent’s market value topped $200 billion earlier this year, and is the second-highest valued business in China (after Alibaba Group). Revenues for its 1H/2016 were $10.2 billion (up 48 per cent y-o-y) and operating profit of $4.18 billion (up 43 per cent y-o-y).

Despite the help from Tencent, Standard & Poors Global Ratings changed its outlook on Naspers to “Negative”, and based this downgrade on its expectation that Naspers profitability will weaken in 2017.  “Slower organic growth in its cash-generative video entertainment operations and its limited ability to quickly adjust its cost base, which bears significant exposure to the US dollar, are the main reasons behind the expected weaker performance,” S&P stated.

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