Vodacom is planning to invest R11.5 billion to boost operations in South Africa.
So says Shameel Joosub, Vodacom Group CEO, in a statement today when the JSE-listed company published a trading update for the quarter ended 30 June 2024.
Among the highlights, Vodacom says group revenue grew 1.5% to R36.2 billion, impacted by foreign exchange rate headwinds.
Group service revenue increased 10% on a normalised basis, above our medium-term target. South Africa service revenue grew 1.8%, supported by an improved prepaid performance.
The firm notes that Egypt grew service revenue 43.7% in local currency, with Egypt financial services revenue up 87%.
Vodacom’s international service revenue increased 2.3%, supported by excellent growth in Tanzania, say the telco, adding that group financial services revenue increased 8.7% to R3.3 billion.
The company transacted $400.2 billion through its mobile money platforms, including Safaricom, over the last 12 months.
Says Joosub: “During the first quarter, we officially celebrated Vodacom’s 30th birthday, having signed up our first customer on 1 June 1994 when we switched on our network in South Africa. Three decades later, the Vodacom Group serves more than 200 million customers across DRC, Ethiopia, Egypt, Kenya, Lesotho, Mozambique, South Africa and Tanzania – a footprint that covers more than half a billion people and is almost 12 times greater than when we launched.”
Revenue diversification
He points out that while the economic environment in recent years has been challenging, Vodacom’s strategy to diversify revenue growth by product and geography is bearing fruit.
“This is evidenced by the 10% growth in normalised group service revenue to R29 billion in the first quarter – exceeding our medium-term target – as well as the 16.8% increase in normalised group financial services revenue to R3.3 billion.”
According to Joosub, service revenue from beyond mobile services (previously categorised as new services and includes digital and financial services, fixed and IOT) contributed R6 billion in the quarter, which equates to 20.8% of the group total, and is well on track to reach our target contribution of 25-30% over the medium-term.
He notes that financial services is a clear strategic priority for the group and remains the largest component of beyond mobile services.
“We now process $400 billion in mobile wallet transaction value annually, highlighting the scale of this business. I was particularly pleased with the growth of M-Pesa services that aim to deepen financial inclusion, such as loans, savings, international money transfer and merchant services.”
Group financial services revenue of R3.3 billion was also supported by rapid local currency growth of 87.0% in Egypt, and strong growth in South Africa within insurance and Airtime Advance segments, he explains.
“Our super-apps – VodaPay, Vodafone Cash and M-Pesa – are key to furthering our financial services ambitions as they integrate our own products and services with the best offerings from our partners.
“Across our geographic segments, Egypt remains a star performer having grown service revenue at 43.7% in local currency, well above the rate of inflation. South Africa delivered a resilient 1.8% increase in service revenue, while Tanzania and DRC were the significant contributors to the 5.7% growth in our International business.”
Joosub notes that South Africa’s results were boosted by improved prepaid performance and price adjustments that delivered greater value to customers.
Supported by additional data allocations and good growth in smart devices, he says, data traffic grew 31.3% while beyond mobile services increased by 6.3%, contributing R2.6 billion to South Africa’s service revenue of R15.3 billion.
“Having invested R1.9 billion in the quarter, we expect to invest around R11.5 billion of capital expenditure in the current financial year to further enhance customer experience.”
Strong Egyptian momentum
Commercial momentum was strong in Egypt, with a 47.9% increase in financial services customers to 8.7 million and a 34.7% improvement in data traffic, the CEO states.
With service revenue of R6.4 billion, Egypt now accounts for 21.9% of the group’s total, ending the quarter with 47.4 million customers, up 6.1%.
“Across our international business our investments into new spectrum in DRC, Mozambique and Tanzania and a 19.7% increase in 4G sites across the portfolio are evident in the 5.7% normalised growth in service revenue to R7.4 billion. DRC delivered high single-digit US dollar growth and Tanzania continued to deliver excellent local currency results, while normalised M-Pesa and data revenue growth was strong at 10.9% and 15.5%, respectively.”
Vodacom’s international business customer base reached 55 million, up 6.4%, supported by strong commercial execution and a further R1.1 billion network investment in the quarter.
“Data traffic grew by 29.6% while smartphone users were up 0.5 million in the quarter to reach 16.4 million as we look to accelerate smartphone penetration with innovative financing options, including a new daily repayment model,” Joosub notes.
“From a mergers and acquisitions perspective, our proposed acquisition of a joint control stake in South African fibre operator Maziv is currently before the Competition Tribunal for consideration. We firmly believe that this transaction will accelerate fibre reach in South Africa, fostering economic development and helping bridge South Africa’s digital divide.”
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