Laying off 25 per cent of one’s staff is the headline no operator wants, but a report on the mess that is Viaplay from investment bank Jefferies makes grim reading.  Not helping at all is the fact that Viaplay risks breaching its banking covenants.

The bank admits that with a new CEO and the “size and speed of his intervention predictions are difficult” for the pay-TV operator.

“Nevertheless,” says Jefferies, “we expect his agenda can be boiled down to the following: refinance the private bond with lending banks and shareholders on the promise he’ll exit International in an orderly fashion, polish the Nordics, and once again try selling it for a premium to a telco as a play on ‘convergence’. Given the evident risks, today’s negative [share] price action feels proportionate.”

The bank’s report continues: “As we’d expected, the new CEO has begun the dismantling of the old CEO’s vision. This includes an exit of all international markets (except the Netherlands), a 25 percent headcount reduction programme and an immediate strategic review which includes a potential outright sale of the entire group. It defines its challenges as both macroeconomic (FX headwinds, weak advertising, D2C maturity) and company-specific (low-quality B2B partnership, over-investment in Originals, fixed inflation in sports rights, poor execution in International). We expect the new CEO to once again, as he did when he was CEO of Viaplay ParentCo, Modern Times Grp (MTG), seek a sale of the Nordic business to a telco on the thesis that the ‘convergence’ of media and wireless infrastructure creates shareholder value.”

The bank admits that it is struggling to see the long-term relevance of the new dedicated markets (Nordics, Netherlands and Viaplay Select countries).

“Investors can be forgiven for feeling whipsawed: exits from the UK and Poland (and others) chaff with much of the historic celebration of entering these markets. What comes across now is a desire by Viaplay to rapidly wind down fixed-cost exposure without exacerbating FCF burn and leverage. This is largely within Viaplay’s ability to control and sublicensing deals / assets disposals, despite negotiating from a position of weakness, can ease the transition,” the report adds.

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