Vodacom has announced that group service revenue was up 5% to R74,2-billion, according to preliminary results for the year ended 31 March. Group revenue increased 4,3% to R90,1-billion.
The group has also grown its customer base by 5,8% to 110-million customers.
The group reported operating profit of R24,5-billion, up 1,1% or 7,4% excluding a one off non-cash IFRS 2 charge of R1,4-billion, and transaction costs of R124-million relating to the BEE deal.
Operations outside of South Africa now contributing 23% to operating profit, up from 14% in the previous year.
Continued significant capital investment of R13.0 billion to improve quality and coverage of all our networks, and strengthen our IT capabilities.
Earnings per share of 867 cents and final dividend of 400 cents per share were reported. A full-year dividend of 795 cents per share was impacted by additional shares issued for the BEE ownership transaction.
South Africa service revenue increased 2,1% to R55,7-illion, with improved growth in Q4 adding 1,5-million new customers.
International operations achieved mid-teens service revenue growth of 15,6%.
Safaricom reported net profit of 14,7% and proposed both a normal dividend of KES50,08-billion (R2,3-billion) and a special dividend of KSh24,8-billion (R1,1-billion).
Safaricom contributed R2,8-billion net profit, net of the amortisation of fair valued assets and before minority interest.
Vodacom concluded its R16,4-billion broad-based black economic empowerment (BEE) ownership deal in September.
Shameel Joosub, group CEO of Vodacom group, comments: “This year we have given back significant value to stakeholders. We unlocked R7,5-billion in value for YeboYethu shareholders, and in September 2018 concluded the largest ever broad-based black economic empowerment (BBBEE) transaction in the South African telecommunications sector.
“A sharp reduction in our out-of-bundle tariffs, contributed to the 37% decline in effective data prices since the end of March last year. In addition to enabling customers to manage their spend and utilise their data, virtually worry-free. This translates into a further R2-billion in savings enjoyed by customers as part of our ongoing pricing transformation strategy. Over a three-year period, data prices have fallen by 57%; despite not having access to further available spectrum.
“The financial impacts of delivering on our promise of further reducing the cost-to-communicate in South Africa, combined with costs associated with concluding our new R16,4-billion BEE ownership deal, is evident in the subdued increase in our operating profit. This masks an otherwise solid operational performance for the group, where service revenue grew by 5%, led by strong performance in our international portfolio. Excluding one off BEE costs, group headline earnings per share (HEPS) rose by 4,2%.
“In August last year, through Vodacom Lesotho, we laid claim to being first in Africa to connect customers to a commercial 5G network. Vodacom South Africa remains ready to follow Lesotho’s lead as soon as the requisite 5G spectrum is secured, a crucial step in ensuring that the country doesn’t get left behind from participating in the Fourth Industrial Revolution.”
Joosub adds that the group connected an additional 6-million customers to the Vodacom and Safaricom networks, a 5,8% increase to 110-million in total. “At the same time, we invested close on R13-billion in network and IT infrastructure to ensure all customers benefit from superior service and network experience across our footprint.”
Despite the low economic growth environment in South Africa and deliberate actions to reduce prices for all segments, service revenue in South Africa rose by 2,1%, he adds. “We are particularly encouraged by the noticeable rise in new contract customers in the fourth quarter in both the consumer and enterprise segments.
“It was a stellar year for our international portfolio where economic and political environments have improved, although it remains challenging in various aspects,” Joosub says. “We grew service revenue by 15,6% and expanded margins. Other significant achievements include the 25.8% growth in data revenue, and another year in which M-Pesa helped to empower inclusive growth by supporting economic development in Mozambique, Lesotho, DRC and Tanzania.
“Our strategic investment in Safaricom contributed R2,8-billion to Vodacom Group’s operating profit, with Safaricom reporting a 7% increase in service revenue and a 13,1% improvement in EBIT, underpinned by strong customer growth and M-Pesa revenues.
“The Safaricom acquisition has proven to be a catalyst for extending our mobile money leadership position on the African continent and in ensuring that financial services have become a significant contributor to the group’s revenues,” he adds.
“In the past year, we effected 11-billion transactions worth R2-trillion to 36,1-million customers across our financial services network, including Safaricom. In South Africa, our profit before tax from financial services doubled to R1-billion, while M-Pesa revenue grew by 32,2% to R3,1-billion in our international operations and now makes up one-sixth (15,8%) of that portfolio’s entire service revenues.”
Looking ahead, Joosub says Vodacom continues to make good progress on its key strategic pillars. “We expect the solid momentum from our digital services platforms to continue,” he says.
“Further, the strategic partnerships being formed by our enterprise business will strengthen our IoT offers and enterprise propositions, ultimately to the benefit of consumers.
“We are in the process of concluding the acquisition of the M-Pesa brand and platform-related assets from Vodafone through a joint agreement with Safaricom1, and we expect this will further accelerate our mobile money growth plans in Africa. The commercialisation of our recently-launched payment gateway and digital wallet will assist in sustaining financial services growth in South Africa.
“We have updated our medium-term targets to reflect these opportunities and the benefits of our Safaricom acquisition, and now expect a mid-high single digit growth rate in operating profit on average for the next three years. As this target is based on operating profit instead of EBIT, we also capture Vodacom’s share of the growing associate profits generated by Safaricom.”