Vodacom’s plans to separate its South African tower portfolio are at an advanced stage and the launch of a company to manage these assets is imminent.
Group CEO Shameel Joosub provided an update on the company’s formation today as he presented Vodacom’s financial performance for the quarter ended June.
The separation of Vodacom SA’s tower portfolio into a standalone tower company, TowerCo, is part of the group’s ‘System of Advantage’ strategy, which seeks to optimise assets.
In this regard, Joosub says, the group is carving-out of the tower portfolio and is in the process of establishing a separate legal entity that will be 100% owned by Vodacom Group.
“During the past quarter, we made good progress on the optimisation of our assets, which in the medium-term will also positively contribute to bridging the digital divide.
“For instance, we are in the process of establishing a separate legal entity for our South African ‘TowerCo’ that will be 100% owned by Vodacom Group and intend to announce the managing director of the business in due course.”
Standalone tower companies benefit telcos fundamentally from a financial perspective, as they have larger economies of scale by hosting multiple tenants. This reduces overall costs for telcos like Vodacom.
In the current reporting period, Vodacom Group posted a healthy rise of 5.2% to R26.1 billion, buoyed by a resilient performance from the South African business.
South Africa’s service revenue grew in the period, with an improved performance in consumer contracts.
“Service revenue in South Africa grew 3% on the back of sustained investment in technology and our network, which continues to enhance the customer experience. This experience was evidenced through the 5.1% growth in our customer contract base to 6.5 million and recognition by Tutela, an independent data research company, as the country’s leader in network quality,” says Joosub.
In SA, new services such as financial and digital services, fixed and internet of things were also up 9.2% and contributed R2.1 billion, or 14.7%, of South Africa’s service revenue.
Mobile contract customer revenue increased 5.8% to R5.5 billion, supported by Vodacom’s consumer and Vodacom Business segments.
Commenting on the group’s overall performance during the quarter, Joosub says: “Vodacom Group produced a resilient first quarter performance despite the turmoil in financial markets and uncertainty about the recovery of the global economy, as a result of COVID-19 and the Russia-Ukraine conflict.
“Inflation continues to accelerate in most of the markets where we operate, which means the cost of living has climbed. As a purpose-led organisation, Vodacom is accelerating the delivery of innovative products to provide even greater value to customers under increasing financial strain.”
Turning to the growing financial services, Joosub says the unit remains a clear strategic priority for the group and the business continues to gain momentum, contributing R2.1 billion to service revenue.
“The segment is driven in the main by our pioneering mobile money platform M-Pesa, which is Africa’s largest by transaction value. Combined with Safaricom, our M-Pesa platform processed $340 billion over the last 12 months, up 20.2%. Looking ahead, a further meaningful 43% reduction to mobile money levies in Tanzania from July 2022 bodes well for M-Pesa’s contribution to financial inclusion in the country.
“The rapid adoption rate of our VodaPay super app in South Africa remains encouraging, with 2.8 million downloads and 1.9 million registered users by quarter-end. Given VodaPay is a precursor to M-Pesa’s evolution and further strengthens our fintech position across our footprint, we remain confident about the growth outlook of financial services.
“Supported by our continued focus on financial inclusion and accelerated capital expenditure, service revenue for our international operations grew 10.4% to R5.9 billion, underpinned by the 11.8% increase in M-Pesa revenue and a 23.4% rise in data revenue.”
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