Vodacom’s big R4 billion load shedding headache
Vodacom has announced a 17.2% increase in Group service revenue (up 7.2% excluding Vodafone Egypt) and a net profit of 2.1% in its preliminary annual results for the financial year that ended on 31 March 2023, despite the economic impact of load shedding.
Shameel Joosub, the Vodacom Group CEO, said that load shedding, start-up losses in Ethiopia, the costs of mergers and acquisitions – such as the Vodacom Egypt acquisition for R43.6 billion – and higher inflation across its markets affected the net profit growth of 2.1%.
In South Africa, the overall operating profit dropped by 1.2% due to higher depreciation and amortisation.
Joosub said that load shedding is hurting South Africa’s telecommunications industry.
“The sustained levels of load shedding 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 backup power solutions such as batteries and generators and a further R300 million in the past financial year on additional running costs, including diesel, security, and maintenance,” he said.
However, the CEO said the company is hopeful that Eskom will introduce its virtual wheeling policy soon.
“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 a reliable power supply to operate optimally.”
Following a change to its dividend policy, the full-year dividend per share decreased by 21.2% from 2022 to 670 cents per share.
Below are the group’s full financials:
South Africa
In South Africa, service revenue grew 2.6% to R60 billion. Vodacom said it was supported by network investment into resilience and capacity and its extensive data-led customer value management powered personalised offers.
Revenue also grew to R84.7 billion, up 4.8%. Vodacom said that this was driven by equipment sales due to 36-month contract offers.
Mobile contract customer revenue grew by 2.8% to R22.6 billion
Data was also a significant contributor to Vodacom South Africa, with prepaid data revenue increasing by 12.9% to R11.4 billion for the full year. The fourth quarter also saw accelerated growth of 17.4%.
Data traffic grew 36.6% for the full year and accelerated 45.4% in the fourth quarter. The group also added 2 million data customers to reach 25.5 million, rising by 8.7%.
The average data usage per market device grew 29.1% to 3 GB per month. Fixed service revenue (7.2%) and financial service revenue (10.8%) also increased.
However, Vodacom’s Business service revenue saw a 1.7% decline to R17.4 billion, which Vodacom said was due to a drop in wholesale revenue following a robust prior year.
Overall, EBITDA climbed by 2.6% for the whole year, with growth accelerating by 5.8% in the second half of the year.
The improvement was supported by accelerated cost initiatives to mitigate the impact of higher energy costs and inflationary pressures.
These cost initiatives included supply-chain management renegotiations and an incremental focus on discretionary
spend and payroll costs.
Although overall operating profit declined by 1.2% due to higher depreciation and amortisation, operating profit in the second half of the year increased by 2.5% – supported by improvements in the EBITDA.
Vodacom added that it invested R11.2 billion into its network to ensure network resilience, add network capacity and enhance IT platforms.
Regarding the outlook, the group said it would leverage its newly acquired spectrum assets in South Africa to better 4G services and invest incrementally into 5G infrastructure.
Moreover, the group expects service revenue growth in FY24, which will likely improve upon the fourth-quarter gains.
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