Vodacom not desperate for acquisitions

Vodacom says it is not desperate to extend its footprint in the face of a slowdown in its native South African market, which contributes the bulk of its revenue.

On Monday (20 May), the group reported a marginal increase in service revenue for the year ended March 2013 to R59.33 billion, from R58.245 billion in the prior period.

In South Africa, service revenue declined by 0.4% to R48.23 million, with the growth in data services and the success of the group’s new prepaid offers offset by lower out of bundle usage, impact of less calling card customers on the network, a weaker performance from the independent service providers and continued cuts in mobile termination rates (MTRs).

Excluding the impact of MTRs, service revenue increased 2.4%, Vodacom said.

Analysts and investors have more recently voiced concern over Vodacom’s ability to continue to grow as strongly as it has in the past in SA, amid increased competition and increasing saturation.

Shares in the group have reflected that scepticism, somewhat. Vodacom closed R1.32 or 1.14% off on Monday, to R114.40 – having dipped to R110.33 in intraday trade. The group is some way off its 52 week best of R129.88.

Looking ahead, Vodacom said it expects “low single digit service revenue growth” in its medium-term guidance, with mid- to high-single digit earnings before interest, taxes, depreciation and amortisation (ebitda) growth also forecast.

In the reporting period for 2013, Vodacom Group reported a 10.9% rise in ebitda to R25.25 billion, while ebitda for its local operation increased 5.4%.

Irnest Kaplan, MD of Kaplan Equities, said that Vodacom’s results were solid when put into context with South Africa’s overall economy. However, he said that the group’s guidance revealed that there could be tougher times ahead.

Kaplan said that some analysts had even suggested a negative decline for Vodacom’s SA operation in future reporting periods. “The numbers suggest they may not be far off,” Kaplan said.

However, Joosub refutes that suggestion. “We don’t see revenue turning negative in SA.” He said that the most recent results reflected a number of “one offs” in terms of impairments, and while voice revenue continues to decline, he believes the growth in data will offset those declines.

“We think the South African market will recover,” Joosub said. “We are not seeing the numbers slowing.”

Joosub says he expects data revenue to account for up to 30% of total revenue within the next three years, driven by its South African operations.

In the current reporting period, data revenue increased 16.3% to R8.88 billion, contributing 18.4% to service revenue compared to 15.8% a year ago.

Vodacom’s head office is in Johannesburg, South Africa while the group also has operation networks in Tanzania, the Democratic Republic of Congo, Mozambique and Lesotho.

Vodacom Country data

This footprint puts Vodacom some distance off its SA rival, MTN, which is present in 22 countries in Africa, and the middle east.

Joosub said the Vodacom is actively looking for acquisitions to extend its footprint in Africa. “Is there a level of desperation? No”.

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Vodacom not desperate for acquisitions