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Vodacom posts R74bn revenue in interim results

Admire Moyo
By Admire Moyo, ITWeb news editor.
Johannesburg, 11 Nov 2024
In South Africa, Vodacom now services 49.2 million customers, an increase of 4.2%.
In South Africa, Vodacom now services 49.2 million customers, an increase of 4.2%.

Vodacom’s mobile money platforms, including Safaricom, processed $421.3 billion (R7.4 trillion) of transaction value over the last 12 months.

This emerged when South Africa’s biggest mobile operator today announced its interim financial results and dividend declaration for the six months ended 30 September.

The results come as Vodacom marks its 30-year anniversary, connecting 206 million customers and providing financial services to 83 million customers.

The JSE-listed telecommunications group’s revenue for the period was R74 billion, up 1%, despite significant foreign exchange headwinds, it notes.

Group service revenue growth was 9.9% on a normalised basis, at the higher end of the company’s medium-term target.

Financial services revenue increased 7.8% to R6.7 billion, contributing 11.4% to group service revenue.

According to the firm, group earnings before interest, taxes, depreciation and amortisation (EBITDA) declined 2.7% to R26.6 billion, but grew 8.5% on a normalised basis.

Vodacom declared an interim dividend of 285 cents per share (cps), representing an 86% payout ratio.

Half a billion landmark

Shameel Joosub, Vodacom Group CEO, says: “On 1 June 1994, we signed up our very first customer when the first of our networks in South Africa went live. Fast forward to 2024, we now serve 205.6 million customers across a footprint that also includes DRC, Egypt, Ethiopia, Kenya, Lesotho, Mozambique and Tanzania, covering more than half a billion people.”

Joosub says while the industry and the company have had to adapt to evolving regulatory pressures and customer needs, Vodacom’s purpose was unchanged for the past three decades, which is to make sure everyone is connected.

“Our latest interim results showcase our product and geographic diversification, with group service revenue increasing by 9.9% on a normalised basis, at the top end of our medium-term target. On a reported basis, group service revenue declined 1.2% to R58.6 billion, due to currency headwinds.”

He adds that group EBITDA grew by 8.5% on a normalised basis and the firm remains on track to invest 13% to 14.5% of revenue into capital expenditure, in line with medium-term targets.

Beyond mobile, which includes digital and financial services, Joosub notes fixed and IOT contributed 21.1% to group service revenue, underpinned by mobile financial services such as payments, savings, loans and merchant offerings.

“Our mobile money platforms, including Safaricom, processed $421.3 billion of transaction value over the last 12 months, cementing our leadership as an African fintech company.”

According to Joosub, in the past five years, the mobile operator invested almost R80 billion across its markets, with a concerted effort to accelerate rural coverage.

“From a financial performance perspective, I am particularly pleased with the manner in which our Egyptian business navigated its way through a material currency devaluation to produce R13 billion in service revenue, underpinned by a stellar 44.1% growth in local currency.”

He explains this was supported by strong customer engagement in connectivity and excellent growth in Vodafone Cash, and contributed to a 5.9% increase in customers to 48.3 million in Egypt.

Shameel Joosub, Vodacom Group CEO.
Shameel Joosub, Vodacom Group CEO.

In South Africa, he notes, Vodacom now services 49.2 million customers, an increase of 4.2%. Driven primarily by beyond mobile services, the consumer segment and prepaid mobile data, service revenue in SA grew 1.3% to R31.1 billion, despite pressure in the wholesale segment.

Beyond mobile services increased 8.1%, contributing R5.5 billion, or 17.7%, of service revenue.

“By containing costs below inflation and delivering revenue growth, South Africa grew EBITDA by 2.3%, while operating profit increased 2.4% on the back of a moderated investment in energy resilience given the recent stability of the national electricity grid,” Joosub says.

“Excellent service revenue growth in Tanzania of 19.1%, and 9% growth in DRC, were the drivers of our commercial performance in our international business. On a normalised basis, our international business grew service revenue at 6.2%, with the customer base up 4.5% to 56.1 million.”

While this helped offset one-off costs in DRC and the impact of repricing in Mozambique, EBITDA from this portfolio declined 20%.

“This was disappointing given the commercial momentum in the segment; however, we do expect an improved EBITDA performance from this segment in the second half.”

M-Pesa growth

He states Safaricom delivered an excellent result in Kenya, while the Ethiopian greenfield operation faced a material currency impact in the period.

In Kenya, service revenue growth of 12.9% was supported by strong adoption of the firm’s 4G services and sustained M-Pesa growth.

“M-Pesa’s 16.6% growth in revenue was supported by business payments. In Ethiopia, we reached 6.1 million customers, up 47.1%, reflecting strong commercial momentum. As an associate of the group, Safaricom’s contribution of R1.3 billion to operating profit was impacted by the currency reforms in Ethiopia. In contrast, Safaricom’s underlying net profit result demonstrated strong growth.”

Vodacom’s headline earnings per share declined 19.4% to 353cps. The company says this was largely attributable to the currency depreciation in Ethiopia (53cps) and one-off costs in the international business.

“From a mergers and acquisitions perspective, our proposed acquisition of a 30% to 40% stake in South African fibre operator Maziv was prohibited by the Competition Tribunal in October 2024,” says Joosub.

“The transaction was designed to assist Maziv in growing its fibre footprint into lower income areas and would have been highly-beneficial for South Africa.

“We await the Competition Tribunal's detailed reasons for prohibiting the transaction, before considering all options available to Vodacom, which may include an appeal in the Competition Appeal Court,” he concludes.

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