Vodacom posts earnings increases as it concludes watershed transition year

As telecommunications group Vodacom posts increases across the board for the year ended March 31, group CEO Shameel Joosub describes the year under review as being a watershed for the evolving technology group.

Vodacom has made significant strides in transitioning into a pan-African technology company through two proposed strategic acquisitions announced in November and the commercial launch of its consortium in Ethiopia this year.

“The purchase of a 55% stake in Vodafone Egypt, which has a proven track record of consistently delivering strong revenue growth, is nearing conclusion and will help us promote greater digital and financial inclusion in Egypt through leveraging our financial services platforms, global partnerships and best practices,” said Joosub.

Further, the proposed acquisition of a strategic stake in Community Investment Ventures Holdings (CIVH), which will assist in narrowing the digital divide by enabling affordable access to connectivity, is currently with South Africa’s regulators for approval.

Joosub also highlighted the March conclusion of the long-awaited spectrum auction in South Africa.

“In addition to accelerating our rural coverage programme and fast-tracking the roll-out of our fifth-generation network, access to high-demand spectrum will result in even faster data connectivity and will ultimately assist in delivering greater value for customers, who have already benefitted from a 43% drop in headline data prices since 2020 and our R50-billion investment in infrastructure over the past five years alone.”

During the year under review, Vodacom increased its capital expenditure from R13.3-billion in the prior year to R14.6-billion to help its networks to cope with significant increases in mobile data traffic volumes and underpinned the increase in group service revenue.

The preliminary results show a normalised 5.8%, or 4.5% on a reported basis, increase in group revenue to R102.7-billion, partially offset by rand appreciation.

Vodacom reported normalised group service revenue and group operating profit growth of 4.6% and 5.4% to R79.9-billion and R28.2-billion respectively during the year ended March 31, which was in line with its medium-term targets.

The group’s earnings before interest, taxes, depreciation and amortisation (Ebitda) increased 2.1% on a normalised basis to R39.8-billion, with an Ebitda margin of 38.8%, down from 40% in the prior year.

The group’s operating results supported a 3% increase in full-year dividend to 850c a share.

In South Africa, revenue expanded 5.3% to R80.8-billion on the back of growth in new services, such as financial and digital services, fixed and the Internet of Things (IoT), which increased 8.5% and contributed R8.4-billion or 14.4% of South Africa’s service revenue, as well as continued demand for connectivity and incremental wholesale revenue.

“Our International operations reported muted revenue growth of 0.6% in the year, impacted by a stronger rand and new levies on mobile money in Tanzania, which has proven to be a setback for our financial inclusion efforts in that country,” Joosub explained, noting, however, that despite the impact of the levies, normalised growth of 5.6% was reported, showcasing the operational strength of the International portfolio.

“Our continued investments in our fourth-generation capacity and coverage to enhance our network lead in all our markets continues to pay dividends with data services a key driver of growth. This is evidenced by the 11% increase in data revenue, contributing 20.7% of International service revenue.”

During the year under review, Vodacom added 5.9-million customers, bringing the number of customers across the group to 129.6-million customers, including Safaricom on a 100% basis.

“In particular, I am also pleased with the growth of our group financial services and IoT divisions in an increasingly difficult trading environment,” he added.

Financial services customers, including Safaricom, increased 5%, or 2.9-million, to 60.6-million, during the 12 months ended March 31.

M-Pesa, which now serves more than 47.1-million customers and 550 000 merchants through 510 000 agents in the Democratic Republic of the Congo, Kenya, Lesotho, Mozambique and Tanzania, processes over 52-million transactions daily with a value of $324.6-billion during the year.

“Alongside M-Pesa, which is expected to further establish itself as Africa’s largest fintech provider through the implementation of an enhanced product roadmap, VodaPay will be instrumental in our quest to connect the next 100-million African customers so that no one is left behind,” Joosub continued.

“Through our sustained investments into financial, digital and lifestyle services, we remain focused on providing opportunities to enhance our relationship with the 129.6-million customers we serve across our footprint.”

Vodacom’s superapp, VodaPay, also reported a high adoption rate since its launch in South Africa in October last year, attracting 2.2-million downloads and 1.6-million registered users.

The app will offer services ranging from loans and savings, seamless QR and person-to-person payments, to entertainment and personalised shopping experiences, promoting greater financial inclusion.

“In addition to focusing on the closure of the proposed acquisitions, and the expansion into Ethiopia, our priorities in the year ahead will include scaling our superapps, deeper penetration of financial services and delivering innovative products to assist customers with the higher cost of living,” Joosub concluded.