Vodacom reported blowout half-year results this morning, buoyed by massive double-digit data usage growth.
In the six months ended 30 September, the telecoms group’s stellar results were supported by higher customer demand for smart devices, including smartphones and tablets, driven by the COVID-19 lockdown.
Data traffic was up 86% year-on-year for the period, with Vodacom saying its data customers grew 4.1% to 22.3 million and smart devices were up by 9.5% to 22.2 million.
The number of 4G devices on the Vodacom network increased 28.8% to 14.2 million, while the average usage per smart device increased 64% to 2.2GB per month.
In the period under review, the telco says it also accelerated fibre rollout, more than doubling the total number of homes and businesses connected to 95 2581. Vodacom-owned fibre passed 128 213 homes and businesses as at 30 September.
Commenting on the marked increase in data surge, CEO Shameel Joosub says: “In South Africa, data usage surged +86%, as connectivity demands changed with a need to work, entertain and educate from home, and as we made substantial reductions in monthly data bundle tariffs.
“Also, the launch of ConnectU, which provides zero-rated access to a wide range of Web sites, including jobs portals and online learning platforms, and discounted offers for poor communities, supported higher usage.”
Joosub says to help cope with sharp increases in data traffic and shifts in customer behaviour patterns, Vodacom accelerated network infrastructure spend over the six-month period to R6.6 billion, including R5 billion in SA.
Vodacom recorded service revenue increase of 7% during the period, which it says was underpinned by strong growth from its consumer and enterprise businesses in SA, where service revenue rose 7.1% despite reductions of up to 40% in monthly data bundles which came into effect on 1 April.
Dividend windfall
Earnings per share and headline earning per share increased 15.6% and 15.7% respectively, while group EBITDA increased 7% to R19.4 billion at a margin of 40.6%. South Africa EBITDA grew 9.9% to R15.3 billion.
In the current period, Vodacom declared an interim dividend of 415c per share, up 9.2%, which it says was supported by headline earnings growth from consolidated companies and the Safaricom dividend receipt.
In the six months, Vodacom’s other business unit also came in strong, boosting the telco’s coffers.
Vodacom Financial Services grew revenue 15% for the period to R1.1 billion, with 12.5 million customers using a financial services product. The company says it advanced R5.7 billion in airtime (38% of total recharges) via its Airtime Advance platform to 10.1 million customers. Insurance policies increased 23.4% to two million, with revenue up 13.5%.
The telco says it is also actively working on the integration of the Alipay platform and build of its financial services ecosystem.
“Investment into digital innovation is key to the group’s growth outlook of which our financial services business is an important enabler. In partnership with Alipay, Vodacom Financial Services is developing a single lifestyle app for both customers and merchants that promotes greater financial inclusion,” Joosub comments.
Vodacom Business also came in solidly, with service revenue increasing 11.1% to R7.6 billion, which the company says was supported by its work-from-home solutions.
Vodacom Business fixed-line revenue grew 11.4%, excluding wholesale transit, supported by strong growth in cloud and hosting and connectivity revenue. Internet of things connections increased 19.3% to 5.5 million with revenue growth of 45.7%.
More M-Pesa
Turning to Safaricom, Vodacom says it added 1.9 million M-Pesa customers and 2.5 million total customers for the six-month period ended 30 September. Mobile data grew 14.1%, sustaining the recovery from the prior year, with 4G devices using more than 1GB, up by 60.6%.
Fibre-to-the-home customers grew 56.8%, as Safaricom also supported work and learn-from-home with higher bandwidth.
“Safaricom’s local currency results reflect the impact of depressed economic activity and lower M-Pesa P2P monetisation, related to the COVID-19 pandemic. Safaricom accelerated capital expenditure by 25.5%, supporting platform growth and a notable financial improvement into the second quarter compared with the first quarter.”
Overall, Safaricom’s service revenue decline of 8.4% in the first quarter improved to a decline of 1.2% in the second quarter.
On a rand reported basis, Safaricom contributed R2.5 billion to Vodacom’s operating profit, +52.2% year-on-year. The contribution to operating profit was buoyed by a one-off deferred tax rate adjustment of R0.8 billion and a weaker rand. On a normalised basis, Safaricom’s contribution to Vodacom’s operating profit declined by 7.4%.
Joosub comments: “While initiatives such as free peer-to-peer M-Pesa transactions at the onset of COVID-19 impacted the financial performance of our International portfolio, it played an important role in facilitating economic activity in addition to being the right thing to do for customers.
“Subsequently, this has supported accelerated platform growth and customer adoption of digital channels to the point where the M-Pesa ecosystem now processes $20.5 billion a month in transactions across our international markets, including Safaricom, and contributed R8 billion revenue in the period.”
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