Vodacom shares up 2.3% on H1 results

Investors reacted positively to Vodacom’s half year earnings report, with shares in the group lifting 2.33%, or R2.58, to R113.48 in mid-morning trade on the JSE.

On Monday (12 November), Vodacom reported an 8.4% rise in revenue for the six months ended September 2012, to R34.43 billion, spurred on by the continued strong demand for data services and further voice penetration growth in its International operations.

This growth however, was offset by reduced mobile termination rates and on-going competitive pressures, Vodacom said.

Service revenue jumped to R29.68 billion, from R27.75 billion in the same period in 2011, with operating profit rising to R8.97 billion, from R7.3 billion. Vodacom highlighted an operating profit margin of 26.1%, from 23% before.

The group reported headline earnings per share of 396 cents, from 324 cents in 2011, and announced a 36.5% increase in interim dividend per share to 355 cents.

An analyst at PSG Konsult said that investors reacted to “an attractive interim dividend” adding that the results were above analyst’s expectations. The dealer said that, considering the group’s outlook and continued dividend pay-out policy, it’s share price was likely to continue to rise in the short term.

Market research and advisory group, Frost & Sullivan noted that Vodacom has shown increased revenues in its South African operations, despite the market becoming increasingly saturated and witnessing more fierce competition.

It pointed out that since the turn of the year, Vodacom has been forced to cut prices amid an intensifying war with rival, Cell C. Despite downward pressure on prices, mobile voice and data revenues rose 7.3% and 20.2%, respectively.

“The pressure to cut prices is changing the rules of the game for mobile operators” said Frost & Sullivan’s ICT research analyst, Lehlohonolo Mokenela. “Operators are being forced to become creative with new tariff structures to ensure price reductions don’t start cutting into their margins”.

According to Mokenela, Vodacom is becoming increasingly diversified, both geographically and across services. The company continued to grow its financial services subscribers, while the contribution of international operations to group service revenues has risen to 20.1% in the current period from 15.8%, in 2011, and 14.8%, in 2010.

Vodacom’s drive to expand its infrastructure showed no sign of slowing down, as 438 base stations were added to the existing total base over the period. The operator’s Capital Expenditure (capex) for the six months increased to R4.713 billion, 36.1% up from the same period in 2011.

With the introduction of Long Term Evolution (4G/LTE) services, Mokenela expects higher capex by the end of the financial period as Vodacom expands its LTE network to other parts of the country.

The group said on Monday that it is on track to have 500 LTE base stations in Johannesburg and moving into Durban.

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Vodacom shares up 2.3% on H1 results