As it celebrates its 30th birthday, Vodacom reports that geographic diversification is driving increases in service revenue and EBIDTA.
Shameel Joosub, group CEO of Vodacom, comments that the company now connects 206-million customers and provides financial services to 83-million customer.
“These were achieved in the first half of the current financial year, a period that was characterised by significant currency headwinds on the one hand and a resilient operational response on the other to ensure that we continue to deliver on our medium-term financial targets,” he says. “While our bottom line was impacted by various one-offs, I am confident that we are poised for a stronger second half performance.”
The latest interim results show that group service revenue increasing by 9,9% on a normalised basis, at the top end of its medium-term target. On a reported basis group service revenue declined 1,2% to R58,6-billion, due to currency headwinds. Group EBITDA grew by 8,5% on a normalised basis and the group remains on track to invest 13% to 14,5% of revenue into capital expenditure, in line with its medium-term targets.
Beyond mobile, which includes digital and financial services, fixed and IoT, contributed 21,1% to group service revenue, underpinned by mobile financial services such as payments, savings, loans and merchant offerings. Mobile money platforms, including Safaricom, processed $421,3-billion of transaction value over the last 12 months.
In the past five years, Vodacom has invested almost R80-billion across its markets, adding 10,9-million customers over the last 12 months.
F”rom 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,” Joosub says. “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.
“In South Africa, we now service 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 South Africa 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 into energy resilience given the recent stability of the national electricity grid.
“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 20.0%. 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.
“Safaricom delivered an excellent result in Kenya, while our 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 our 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. “
Headline earnings per share declined 19.4% to 353 cents per share (cps). This was largely attributable to the currency depreciation in Ethiopia (53cps) and one-off costs in the International business.
“Looking ahead and despite the pressures associated with this economic cycle, we will continue to invest in and execute on our strategy,” says Joosub. “It is pleasing that our markets continue to deliver strong operational momentum, despite the material currency devaluations in Egypt and Ethiopia.
“While we remain mindful of an evolving macro-economic environment across our footprint, including foreign exchange rate risk, I believe that the Group is well positioned to capitalise on opportunities once the global economy shifts from its current cautious optimism to sustainable growth. This means that we will relentlessly continue to pursue our purpose of connecting people for a better future.”