The Consumer Unity and Trust Society (CUTS) has said that they are convinced that price adjustments proposed is not only untimely, but also too steep and would affect consumer negatively.
In statement released to the media today, CUTS said that they have made an effort to try and understand the justification behind this increase so as to fulfil their watchdog duties.
Below is the full statement
CUTS’ Reflection Note
On the Pending DSTV Price Hikes
Introduction
There has been a pouring of complaints from consumers in retaliation to the looming subscription fees for Multi-Choice DSTV services effective this April. The increase has been received with mixed feelings with most consumers feeling that this is not the right timing for it.
We have observed that DSTV consumers on social media channels such as Facebook and Twitter have started online campaigns to boycott paying for their April DSTV subscriptions.
As Consumer Unity and Trust Society (CUTS) International Lusaka, we have made an effort to try and understand the justification behind this increase so as to fulfil our watchdog duties. This process involved having a bilateral meeting with Management and other stakeholders – including individual consumers.
This array of engagement enabled us to collate and aggregate different concerns against the justifications presented by Multi-choice to arrive at conclusions below. It must be mention from the onset that Multi-choice, despite the Zambian government owning 49% shares, is a private entity – and therefore the company has every right to adjust its prices accordingly.
We are convinced that price adjustments could be timely, but the margin of adjustments is too steep and would affect consumer negatively. The pending price adjustments are tied to two things. Firstly, the normal annual price adjustments and secondly, underperforming economy. These two factors are collectively addressed in the subsequent points.
1. General Macro-economic performance
Prudent macroeconomic management is the panacea to private sector and economic growth. Medium-term prospects for Zambia’s growth remain good but are subject to evenly balanced risks emanating from global uncertainties and macroeconomic management at national level. Among the external risks are fast-declining copper prices.
The economy can absorb moderate declines in copper prices, but steeper declines will hurt the country and the performance of the exchange rate further. We agree with Multi-choice and other private sector players that, if home grown solutions are not sought to eschew the external economic risks, the domestic economy will be affected gravely.
Secondly, Zambia’s economy has seen far too many unexpected policy changes in recent years. Persistent and even escalating perceptions of an uncertain policy environment could weaken investment, thereby reducing GDP growth.
Further, the risks of fiscal slips could undermine macroeconomic stability and undo some of the country’s recent hard-earned gains. Government hostility measures are required to police this situation as it is suffocating private sector progression (including Pay TV) and ultimately consumers.
Among the arguments Multi-choice has given on the pending hike is the increasing cost of production in Zambia as a result of exchange rate volatility and inflation.
2. Inflation:
High inflation is cited as one of the factors affecting the cost of production for Multi-choice. We need to make mentioned that it does not necessarily mean that all commodities or services should have their prices increasing when inflation is on a rise. In actual fact some can even be dropping. Current Central Statistical Office (CSO) inflation figures show that February inflation dropped to 7.4 % from 7.7 % in January 2015. This downward surge should be considered in Multi-choice’s subsequent decision. We are, however, in agreement with Multi-choice that using the January and February figures might not be prudent as sustainability is not guaranteed.
The other issue that require further clarification from Multi-choice was how inflation was affecting the company – in specific terms. In our meeting, we didn’t explore this due to time limitation.
Disaggregating the Consumer Price Index (CPI) and pointing out the commodities or services under the CPI which were affecting the operations of the company would assist rest this issue. A snap shot of the major drivers in the drop in inflation from 7.7% to 7.4% include alcoholic beverages, tobacco and housing.
Generally, these are the products that have been driving inflation over the last months. From these products, its only housing, that has a relationship with Pay TV Pricing. We might have an asymmetric view from Multi-choice and the company would assist us by explaining the inflation argument further.
In the same vain, it might be important for Multi-choice to consider looking at the net equalisation and trade off effects arising from fuel reduction on its operational costs.
3. Exchange rate volatility;
This was eruditely explained and it come to light that transactions associated with this industry involve huge costs – both in content procurement, rights and transmission holding.
Billions of dollars are spent annually meet consumer satisfaction. With this justification made and upon reflection, there remain some concerns which might still require clarity. Firstly, production/Programming of DSTV content that is consumed in Zambia is transmitted from South Africa. This entails that production is done in South Africa and all production related costs are subjected to the South African exchange rate regime.
It is clear that South Africa is a low cost-producer of DSTV content hence the variance in prices. The signal that is transmitted to Zambia could be the only major service that could be subjected to the Zambia exchange rate system. The impact might be minimal compared to other players that produce the content in Zambia.
4. Dollar vs. Kwacha Pricing Methodology:
It is comforting to learn from Multi-choice that the company has stopped using the dollar ratio to come up with a kwacha price list. But what is worrying is that dollar-kwacha performance still informs much of the company’s decisions on pricing. Nonetheless, this paradigm shift in the pricing methodology will require probing.
Our initial assessment presents serious concerns which reveal that, despite Multi-choice, freezing the subscription fee in kwacha, the company was still gaining from an inflated exchange rate figure.
After engaging with Multi-choice, we were furnished with the figures that were being charged for the premium bouquet dating as far as April 2012. For purposes of this discussion, we will look at the premium bouquet and zero in on the period starting July 2014 to date.
The table below summarises our findings.
|
Month |
July14 |
Aug 14 |
Sep14 |
Oct14 |
Nov14 |
Dec 14 |
Jan15 |
Feb15 |
Mar15 |
|
|
Monthly USD $ subscription fee (premium) |
82 |
82 |
82 |
82 |
82 |
82 |
82 |
82 |
82 |
|
|
Actual USD Paid $ BY Subscribers )based on SCH Rates |
84.71 |
87.71 |
83.89 |
82.96 |
82.56 |
82.43 |
80.9 |
76.7 |
|
July 2014 was the period when the Statutory Instrument (SI) 33 was affected. The SI prohibits the quoting, paying, demanding or receiving foreign currency as legal tender for goods, services or any other domestic transactions. By this development, Multi-choice, including other private sector players, were coerced to start charging in kwacha. In arriving at the July 2014 compulsory kwacha figure from the USD currency which was being used, Multi-choice converted the June 2014 average subscription fee which was USD 82. According to the pricing statistics received from Multi-choice, USD 82 subscription fee amounted to ZMW 521. This entails that Multi-choice was using ZMK 6.35 per dollar exchange rate. According to Stanbic Bank, the July exchange rate was ZMW 6.15.
This therefore entails that the USD82, which was converted so us to have the present fixed kwacha rate, should have translated to ZMW 503.48. In short consumers should have been paying ZMW 503.48 and not ZMW 521 for the premiums package. Using this exchange rate, ZMW 521 converted to USD 84.71 and not the USD 82.
This entails that, beyond the monthly profits which were made per subscription, a 3.3% extra was charged. In kwacha term, an extra ZMW 17.52 was being charged. There could have been a justification for this but we are not privy to that. And please note, we have used Stanbic Bank rates and have not used any other rates from other Banks and this analysis is purely in relation to the exchange rate system of Stanbic Bank.
By end of August, an extra ZMW 33.92 was charged due to the higher exchange rate that was used when converting to kwacha in July. According to Stanbic Bank, the Kwacha had gained in value and it was trading at ZMW 5.94 per dollar. Since Multi-choice had frozen it subscription fee (ZMW 521) using ZMK 6.35 per dollar exchange rate and not ZMW 5.94 as reported by Stanbic Bank, there were gains the company recorded.
Converting ZMW 521 given by Multi-choice at 5.94 per dollar, this translated to USD 87.71 per subscription. This also entails a further 6.96 percent extra was charged from the initial indicated $82 despite the monthly kwacha subscription fee being constant.
In the third month, ZMK 11.74 extra per subscription was paid by consumers due to high exchange rate used. Stanbic Bank statistics show that the kwacha depreciated resulting in the K521 converting to USD83.89. In October, ZMW 6.03 November, ZMW 3.53 extra was being charged. The final quarter showed a downward trend in the Kwacha. However, severe as it was, Multi-choice was still earning ZMW 2.72 more in December.
We can therefore conclude that in 2014, Multi-choice gained substantively due to the higher exchange rate used when transforming the pricing structure from dollar to kwacha. In aggregated terms, using Stanbic Bank rates, about ZMW 75.46 extra was charged for one subscriber between July and December. Assuming that there are a thousand subscribers in the Zambian market for the premium bouquet and they all constantly bought the premium package, this would amount to ZMW 75, 460.
The exchange rate affected Multi-choice in January-onwards as the kwacha underperformed below the ZMW 6.35 exchange rate used by Multi-choice. This has however been only for two and half months and the gains acquired between July and December can be used to cushion the negative effects.
5. Territorial Spread:
We are informed that there are three categories of Multi Choice Services in Africa namely South Africa, Nigeria and the Rest of Africa. Zambia falls on the latter (the Rest of Africa). The content (films etc) bought by the South African Unit of Multi-choicethrough specific demands ensuing from consuming countries under the Rest of Africa ambit, is consumed by all these countries under this category.
The ethical argument in this narrative is that Multi-choice accrues benefits from its territorial spread as content purchased (as a result of demand from one specific country) is also consumed by other countries in this category. In short, other consumers could be paying for a specific content enjoyed by one particular country and this brings positive spin-off in the income generation process of the company.
We are cautious that addressing some of these questions would require divulging confidential information and it will not be in the best interest of Multi-choice to share such information. We are, therefore, hoping that points raised above are substantive enough for Multi-choice to reconsider and adjust downwards the pending hike. Multi-choice enjoys a good level of market dominance and therefore, any action has potential to coerce other industry players to follow suite.
Issued by:
Simon Ngona
Center Coordinator
Consumer Unity and Trust Society (CUTS) International
Lusaka, Zambia
No one is paying this April ,please cancel those direct debits , Mine has been cancelled .
What a non story- Either you afford it or you don’t
If you cant afford, DO NOT entice others not to pay for a service you cant afford.
Africans and Zambians particularly have no clue and are very backwards
Thanks
BB2014
DON’T BLAME MULTICHOICE. THEY ARE IN BUSINESS AND THEY ARE SIMPLY RESPONDING TO THE DICTATES OF THE PREVAILING MARKET PRESSURES IN PROVIDING THEIR SERVICES TO THOSE OF YOU WHO LOVE THEM. BLAME EDGAR LUNGU AND HIS KAPONYA PF PARTY. THEY HAVE BEEN EATING AND DINING SINCE 2011, AND NOW THE MONEY FROM THE TREASURY HAS FINISHED. AND YOU AND THE REST OF US HAVE TO SUFFER THE CONSEQUENCES OF ABUSE OF FINANCES AND POOR ECONOMIC MANAGEMENT BY GOVERNMENT.
I am certainly not paying…why doesn’t Multichoice Zambia peg their billing to the Rand…everything come from SA anyway and Rand is a convertible currency
Do multichoice run internet services? Why watch TV, when you can’t even see Edgar dropping from HO? Zambians need be here at LT!!!!
where are pictures of the week?
This is a good analysis and i have just been given another reason why i shoud not pay DSTV next month. They charged me K521 instead of K503. I will pay for internet from the K500 and remain with some change for popcorn………..
EDGAR LUNGU AND HIS TEAM SHOULD BE CONTENT WITH WHAT ZAMBIA HAS. STOP ANY MORE BORROWING OF MONEY.
Ubuteko bulandeko……. when the government says something it will carry weight. Ebatuletelele…
“It must be mention from the onset that Multi-choice…. is a private entity – and therefore the company has every right to adjust its prices accordingly”. End of story. They don’t owe you or me any explanations regarding their business decisions. At this point, if you decide DSTv is a necessity and can’t afford it – you know what to do. Nobody is forcing you or me to continue paying for it. While you’re at it, can you also go and pay a visit to Game / Home Corp / Woolworths / and find out why we pay more than our colleagues in South Africa. LOL!
Good points.
I agree with you, and that was the point I was making- If you are struggling, DO NOT drag people to your standards.
Millions of people here do not have sky and watch football games in the pubs and ave money.
How did we survive before Multichoice came along. They are a luxury and people should shut up and not tell us whether they are paying or not, it is your prerogative.
Not sure they would lose any sleep by your innuendo decision to start with
Thanks
BB2014
@ Kaya
That’s not quite true in many developed countries there are strong regulators that investigate and can penalise corporate bodies that strongly dominate a sector in terms of pricing and terms and conditions that they give the consumer. Its not just take it or leave it. Cases being Microsoft, Google etc
You know nothing about consumer rights ,do you ? Take a seat.
Multi-Choice needs to introduce a service of “pay as you watch” this service will allow customers subscribe to channels which they feel is of their interest. In Europe subscribers pay for channels they want. If a subscriber wants to add any channel, they just need to add to the current subscribed channels and pay accordingly. Zambians can not be forced to pay for channels which they will never watch or understand the language. It should be per choice. If this is an international Service Provider, why are they only bring up channels which have South African and European languages. Introduce local language for respective countries where their presence is.
Are these CUTS serious one would think M-NET subscription is mandatory TV levy consumers pay….Zambians are funny people they don’t have regular tap water and suffer constant loadsheding they never complain as loud even in bars there is no water and they expect you to shake hands with everyone in there…really laughable.
Can somebody tell me whether there is another cable TV System that we can subscribe to apart from DsTV that is compactable in Zambia?
Multichoice is a business model which the owners have heavily invested in and can decide how they want to make a return from it.
Please leave them to run their business. if you cant afford don’t buy….
please lets not pay taking us for granted, we also need a refund for all that over charges
this increase doesn’t make sense, all the competitions are for SA and Nambia only, but why bring the service here if we cant take part.
@ truth and permalink, you are foolish and self centered. Its not about affordability but profiteering on the part of multichoice. Mr. Simon Ngona has fielded a brilliant and i wish to commend him for that. Speak to his observation. By the way, how much are you worth? Are your relatives well taken care off.
@ truth and permalink, you are foolish and self centered. Its not about your affordability but profiteering on the part of multichoice. Mr. Simon Ngona has fielded a brilliant argument and i wish to commend him for that. Speak to his observation and not how much you are worth. By the way, how much are you worth? Are your relatives well taken care off
We are equally complaining in Kenya.They are effecting it worldwide taking advantage of global June analogue deadline-The famous digital migration.
Bloody hell someone actually sat down and did all this research because of DSTV????? My word!
I am really wondering why people are complaining about the hikes in the DSTV charges, you mean they are not able to appreciate the way the Kwacha is nose diving. DSTV is a business entity and it has to keep up with the prevailing situation. Why do you want to victimise DTSTV for only a few individuals who think they have to always be enjoying the best in their lives at the expense of the rest of Zambians. Life is no longer the same, to some may be it is another song in the air, the more reason they do not take voting very seriously. We need some of these people to realise that there is poverty out there and that is what it means, to have not enough money to pay for your services. It means you are getting close to the poverty dudunm line.
Leave Multichoice alone if you cannot afford let us watch ZNBC or MUVI. Do not destroy clusters of such quality business to suit our desires plse. Let us pay attention to necessities of life this is a private business.
I have been following what most bloggers on this site have said and it makes reading interesting. however we seem to miss one important point that is coming out of this “CUTS Position” which is the fact that they recognise and are not against the hiking of rates by DSTV, the only big problem is that the way it has been done is rather unfair to consumers. I am a consumer and has a right to choose what I want or can afford, it is also my democratic right not to be exploited by dominant players in such markets mainly because they are private businesses hence have the right to do what they want with their businesses. if that would be the status quo then why have consumer protection and all these watchdogs’. What is more worrying is the fact that even after being furnished with full…
CONTINUED — information and stats showing that from July 2014 Zambians were being exploited by these people making +3% in USD terms on top of their “normal profits”. today Zambia is one of the most expensive places in Africa because of the skewed pricing regime we have. Today its Multi Choice tomorrow it will be something bigger and we will still say its ok coz its a private business? I can site examples of our Cement, Sugar the list is endless, we cry every day not that we want cheap things but coz we want businesses that are not there to milk citizens. ENOUGH IS ENOUGH we demand a reduction from the proposed 21% to something sober. let us for once speak with one voice regardless of whether we can afford this service.
@Zedman What I am failing to understand is the outcry over …DSTv. I mean, we know our fellow country men are sleeping on floors at UTH with little to none health care, there was a fuel crisis for over a week, underage girls being forced in to marriage, some areas to this day do not access to clean water or health facilities. Un yet, there has been no petition raised over these matters. Has anyone ever died because of no access to DSTv? I hope you can see my point here- which is , DSTv is not and should be something deemed as a necessity. If anything, for lack of a better word, it is more suited to be referred to as a ‘luxury’ judging by then number of consumers in Zambia.
well I am not paying imagine how do we pay so much to watch MacGyver? nearly all the movies they bring are repeats apart from news and live football.
Its sad that we are spending so much talk on a luxury item – DSTV to the extent that the Minister summoned the DSTV MD and now the Consumer Watchdog spending time analysing the issue. Surely are these efforts WORTH it on a luxury item. I think NOT. I would rather the Consumer Watchdog and the Minister address themselves to INTERVIEW FEES that prospective college students are subjected to. Are these fees necessary? Are they not a barrier to higher education which is a bedrock to development knowing too well that the MAJORITY are from POOR families. Recently Macha Nusing Sch run adverts on ZNBC asking would be pupils to pay K250 as interview fees. Sadly Govt and private schs are all involved in this interview scam. This is one real issue and not hikes on the luxury DSTV.
april, I will not pay.
Why does DSTV force consumers to watch channels that they are not interested in. Why should I be paying for 60 plus channels while I watch only five. My suggestion to them is that they should consider consummers to pay for channels they are willing to watch or enjoy watching. Let them peg their charges per channel. Each channel should have its own cost. A customer will them choose those channles suitable to him. For example:- BBCW=K50=00,Aljezeera = 60=00, SupperSport 3A 1, k150=00 and so on and so fourth. Then if i choose to pay for only four channels then thats my choice. Believe me you DSTV you could make a lot of money this way because pupular channesls may be more expensive that those common ones. Please try this option and in this advance technological world this is very muc
You Zambians are penny wise but pound foolish. Why are making so much noise over nothing? Why don’t you make the same noise over the filth and dirty hospitals, the useless government school,fuel shortages, never ending depreciation of the Kwacha, very high and ever increasing unemplyment , very high cost of living and the list is endless. Get a life!
All those explanations and justifications by MultiChoice Zambia are scapegoats. The main issue is this: MZ moved into another expensive shopping mall – East Park Mall – where rentals are very high. The intended diabolical price increase is aimed at meeting astronomically high rentals at Manda Hill and East Park Malls. Why did they move out from Alick Nkhata complex to go and operate from expensive places? MZ is merely a customer service centre. why should it be more expensive than South Africa? Mr Botha and his team are evil people.