Vodacom Group has released preliminary results for the year ended 31 March 2023, with group revenue at R119,2-billion, up 16% thanks to the acquisition of Vodafone Egypt and rand depreciation against a basket of international currencies.
The group reported service revenue growth of 17,2% or 7,2% excluding Vodafone Egypt, supported by data and financial services revenue.
Financial services revenue increased 29,2% to R9,9-billion, contributing 10,5% to group service revenue, and group EBITDA grew 13,2% or 6% excluding Vodafone Egypt, reflecting a clear improvement in second-half profitability.
Shameel Joosub, Vodacom Group CEO, comments: “In a year defined by the global economic slowdown and financial market uncertainty, Vodacom Group has delivered a satisfactory set of results, showcasing the resilience of our strategy and our track-record in adapting quickly to changes across operating environments. Given the numerous external pressures, it is particularly pleasing to have delivered a 17,2% increase in group service revenue (up 7,2% excluding Vodafone Egypt) with net profit up 2,1%.
“The war in Ukraine, which followed hard on the heels of a global health crisis, resulted in supply-chain disruption and inflationary pressures. These factors have contributed to a higher cost of living, a sharp rise in interest rates and foreign exchange rate volatility across our markets.
“Guided by our purpose-led approach, we responded by absorbing inflationary pressures where possible and sought to deliver even greater value to customers in an attempt to assist more vulnerable communities impacted by economic hardship,” Joosub adds.
“At the same time, we diversified and accelerated our growth profile by completing the acquisition of a 55% stake in Vodafone Egypt for R43,6-billion, the largest acquisition in the Vodacom Group’s history and one that expands our population reach to over 500-million people across Africa.
“Since consolidating Vodafone Egypt on 8 December 2022, it has contributed R8-billion to group service revenues, prompting an upgrade in the Group’s medium-term service revenue and EBITDA growth targets.”
Joosub says the group remains committed to spending 13% to 14,5% of its overall revenue on capital expenditure that ultimately results in an enhanced customer experience through sustained investments in technology and network infrastructure.
“A prime example of this promise is the pledge made at the recent South Africa Investment Conference of R60-billion of capital investment over the next five years in South Africa alone having delivered on a R50-billion pledge made in 2018 over the previous five years,” he says. “These substantial investments have and will contribute significantly to enhancing network resilience to keep customers connected through the likes of elevated levels of loadshedding, the acceleration of 5G coverage, as well as our rural coverage programme to help bridge the digital divide.”
He adds that Vodacom responded to South Africa’s power crisis with increased investment in power resilience, which has ensured network availability and contributed to an accelerated demand for data, up 45.4% in the fourth quarter.
“The sustained levels of loadshedding have been disastrous for the South African economy and the industry as a collective. Since 2020, Vodacom South Africa has spent over R4-billion in back-up power solutions such as batteries and generators and a further R300-million in the past financial year on additional running costs in the form of diesel, security and maintenance.
“We remain confident that the ‘virtual wheeling’ pilot project that we’re pioneering with Eskom, South Africa’s power utility company, will be signed off in the near term and that this will have a significantly positive impact on the country’s power grid and ultimately on the over 20 000 towers across the industry that require reliable power supply to operate optimally.”
Joosub explains that the power crisis in South Africa, higher interest charges, Ethiopia start-up losses, M&A costs and higher inflation across Vodacom’s markets weighed on net profit growth of 2,1%.
“In South Africa, financial services continue to grow at a double-digit rate, supported by our insurance portfolio and Airtime Advance product. I am particularly encouraged by the traction and transaction volume growth that our VodaPay super-app continues to attract through its 5,7-million downloads and 3,3-million registered users.
“In the coming year we will scale lending, insurance and payment products, including cash-in and cash-out, while creating new business cases for remittances and wealth management. Our digital services, fixed and IoT businesses were also solid performers while wholesale revenue pressures and a strong prior year saw Vodacom Business’ service revenue decline marginally by 1,7%.
“Our International operations in DRC, Lesotho, Mozambique and Tanzania produced good growth, underpinned by a 31,1% increase in M-Pesa revenue and a 33,2% rise in data revenue. As expected, start-up costs associated with Safaricom Ethiopia have curbed Safaricom’s contribution to Group operating profit to R2,8-billion, 9,8% lower than last year.
“Pleasingly, Safaricom Ethiopia was recently awarded a mobile financial services licence, representing another important milestone in our ambition to transform lives in the country.”
Financial services is the key contributor to Vodacom’s new services, Joosub says. “This is evidenced by the 29,2% increase in group financial services revenue to reach R9,9-billion, as we continue to scale our product suite for consumers and merchants.
“Our International merchant sign-ups increased three-fold in the year, helping us expand our addressable commission pool beyond peer-to-peer payments and withdrawals into both online and offline commerce. We remain Africa’s largest mobile money platform by transaction value with M-Pesa now processing an impressive $364,8-billion in the year.
“Our proposed purchase of a joint venture stake in South African fibre company Maziv is expected to assist in narrowing the digital divide by enabling affordable access to connectivity in some of the most vulnerable parts of the country through an ambitious fibre roll-out programme,” Joosub adds. “The joint venture will house the material fibre network assets of Vodacom South Africa and CIVH and having received ICASA approval in October last year, subject to conditions, the transaction remains subject to the Competition Commission’s ongoing approval process.”