Vodacom financial services ballooned in the six months ended September, supported by insurance, new products and an improved performance of the airtime advance product.
In its interim results released today, Vodacom reported service revenue generated from financial services was up 8.1% to R1.4 billion, underpinned by the insurance portfolio.
Vodacom financial services customers were up 10.2% to 63.1 million, including Safaricom on a 100% basis.
In the six months, Vodacom financial services revenue growth accelerated to 11.6%, while insurance policies grew to 2.6 million, up 19.4%.
“Our new products leverage our dual-sided financial services strategy, with encouraging progress in areas such as merchant acquiring. Our super app, VodaPay, reached 2.2 million registered users through 3.5 million downloads in less than a year since launch,” says Shameel Joosub, Vodacom Group CEO.
“We exceeded 100 mini apps on the platform in the second quarter, with near-term plans to add cash-in and cash-out capabilities and scale affordable consumer micro loans, as we expand our offering to drive deeper penetration of financial services.”
On other key metrics, Vodacom reported revenue of R53.7 billion, up 7.7%, supported by normalised growth of 5% and rand depreciation against its basket of international currencies.
Group service revenue growth was 7.2% in the period, while the telco reported muted EBITDA growth of 0.6% to R20.2 billion, which it says was impacted by once-off factors, as well as higher energy and network costs.
Headline earnings per share declined 9.5%, which Vodacom says was impacted by start-up losses in Ethiopia and higher finance costs as interest rates normalised to pre-COVID-19 levels.
Home advantage
In its home market of South Africa, Vodacom reported service revenue grew 3% to R29.5 billion, supported by the mobile contract segment and growth in new services.
“New services such as financial and digital services, fixed and IOT [internet of things] were up 7.6% and contributed R4.3 billion, or 14.5%, of South Africa’s service revenue. In the second quarter, service revenue growth accelerated modestly to 3.1% − this was supported by the excellent traction of our personalised bundles. Revenue increased 4.9% to R41.2 billion, driven by strong equipment sales,” says Joosub.
“Mobile contract customer revenue increased by 5.7% to R11.2 billion, with both Vodacom Business and consumer contracts contributing to this growth. In the first quarter, we increased contract pricing by between 3% and 5% to help mitigate inflationary cost pressures.
“We added 62 000 contract customers in the second quarter and improved ARPU [average revenue per user] by 0.7% to R301, despite the repricing pressure associated with the government contract for mobile services (RT15) within our Vodacom Business segment.”
In the six months, Joosub says the prepaid segment delivered a resilient performance, given a challenging macro backdrop associated with a sharp increase in the cost of living and disruptions to social grant payments.
“Prepaid revenue increased 2.2% to R12.7 billion, as we endeavoured to increase share of customer wallet by leveraging our innovative customer value management capabilities to deliver contextualised and personalised ‘bite-sized’ offers to keep customers engaged on the network.
“In the second quarter, prepaid revenue growth accelerated to 2.7%, as prepaid data revenue grew 11.8%. Data revenue growth reflects the high adoption of our data-led bundles, which offer lower rates to the most price-sensitive, lower-income consumers.”
Joosub notes Vodacom’s data traffic was up 30.3% in the six-month period, supported by smart device penetration and affordable data tariffs.
“We added 0.8 million data customers, reaching 23.8 million customers, up 4.1%. Smart devices were up by 11.8% to 27.6 million, while 4G and 5G devices increased by 24.1% to 20.3 million. The average usage per smart device increased by 24% to 2.8GB per month.”
In Vodacom Business, Joosub says, service revenue grew 2.1% to R8.6 billion, supported by sustained demand for mobile connectivity and IOT revenue.
This demand for connectivity, he says, was evidenced by mobile contract revenue growth of 7.2%, achieved despite the pressures associated with the RT15 government contract.
He says: “IOT connections were up 23.2% to 7.1 million, with revenue growth at 7.5% to R0.7 billion. Wholesale revenue dampened the Vodacom Business growth profile, as we lapped a strong prior year comparative period.”
Turning to regulatory progress on strategic mergers and acquisitions, Joosub says Vodacom’s move to acquire equity in Community Investment Ventures Holdings (CIVH) remains subject to Competition Commission approval, having recently received approval from ICASA, subject to licence conditions such as open-access.
Vodacom made a mega move for the CIVH fibre assets in November last year, in a deal that will see the telco co-controlling 30% equity in a newly formed infrastructure company.
“The deal is closely aligned with the build-out of our system of advantage, which is aimed at delivering diversified and differentiated connectivity offerings to our customers. Further, we expect this investment will accelerate fibre reach in South Africa, fostering economic development and helping bridge South Africa’s digital divide,” says Joosub.
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