Vodacom shares fall the most in almost 8 months on consumer concerns

Vodacom Group shares fell the most in almost eight months after the wireless carrier with the most South African customers reported slower revenue growth in its domestic market, as a sluggish economy hurt consumer spending, Bloomberg reported.

Vodacom on Monday reported a 5.6% rise in interim revenue to R42.7 billion for the six months ended September 2018, while adding 2.5 million new customers in South Africa.

Group service revenue was up 6.1% (5.8%) to R36.8 billion.

Operating profit was up 0.8% to R11.1 billion, but headline earnings per share (cents) declined 13.5% to 387 cents per share, impacted negatively by the once-off effects of a new black economic empowerment deal.

First-half sales in SA rose by 4.3%, compared with 7.7% in the previous year.

An interim dividend per share of 395 cents, was up from 390 cents.

South Africa key indicators:

“In South Africa, underlying growth has weakened as the country’s economic slowdown increasingly weighs on consumer spending in the market,” said Shameel Joosub, Vodacom Group CEO. “Still, service revenue rose 4.6% as anticipatory measures driven by the use of big data machine learning in more areas of the business has contributed to countering some of these pressures.

“The 2.5 million increase in customers in South Africa since March shows that our sustained effort to deliver greater value is working across prepaid and contract and is evidence that our personalisation through big data is delivering results,” he said.

Shares in the group declined nearly 8% (7.80%) to R120.16 on the JSE, in afternoon trade (R13h07), extending the decline for the year to 17%, and giving the group a market cap of R220 billion.

“The unit of the UK’s Vodafone Group Plc experienced tough conditions in South Africa, with weaker device sales largely behind the sales slowdown. The carrier has used investment in data to offset the weak environment, helping to boost customer numbers, though revenue per user fell as callers opted for cheaper packages,” Bloommberg reported.

“Vodacom’s dividend was good, and its international relations are improving, but South Africa’s data revenue growth was a bit disappointing,” said Peter Takaendesa, a money manager at Mergence Investment Managers.

Joosub told an audience at the group’s results presentation in Midrand that customer are under pressure, with the company noting a slight increase in bad debt, as customers struggle to pay their contracts, something not seen in the recent past. Joosub said the company aimed to offset this activity by offering more suitable contracts.

Read: Vodacom SA adds 2.5 million new customers despite economic slowdown

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Vodacom shares fall the most in almost 8 months on consumer concerns