Vodacom targets diverse revenue streams amid dip in interim earnings

Vodacom Group on Monday (15 November) published its interim results for the six months ended September 2021, showing a decline in operating profit, while service revenue was flat over the period.

Headline earnings per share declined to 505 cents per share, from 532 cents per share before, but when adjusted for the one-off deferred tax rate adjustment in the prior period, grew 3.0%, Vodacom said.

Group revenue of R49.9 billion was up 4.2%, as strong normalised growth of 7.9% was partially offset by rand appreciation, it said.

The group added 6.2 million customers, to serve a combined 129.9 million customers, while it declared an interim dividend of 420 cents per share, up 1.2%.

South Africa

South Africa service revenue grew 3.6% to R28.6 billion, supported by continued demand for connectivity, incremental wholesale revenue and growth in our new services, the operator said. New services such as financial and digital services, fixed and IoT delivered strong growth in the period, contributing R4 billion of South Africa’s service revenue.

Mobile contract customer revenue increased by 4% to R10.6 billion. Vodacom Business continued to deliver strong growth while consumer contract revenue was stable year-on-year. Vodacom said it added 140,502 contract customers in the half, mainly in Vodacom Business, and increased ARPU by 1.4%.

“In the prior period, prepaid ARPU reached R64 as customers increased usage during the more stringent lockdown restrictions. As these restrictions eased, prepaid ARPU normalised and in the current period was R56. Encouragingly, prepaid ARPU of R56 in the second quarter is higher than pre-Covid levels and up 1.8% quarter-on-quarter, as price transformation initiatives supported incremental usage.”

From a customer base perspective, strong commercial initiatives supported second-quarter net additions of 1.2 million, with prepaid customers up 6.4% year-on-year, Vodacom said.

“The combination of ARPU normalisation and subscriber growth resulted in a broadly flat mobile customer prepaid performance in the period. Adjusting for the R142 million loyalty programme provision release in the prior period, prepaid mobile customer revenue increased 0.8% (2Q: -0.1%) in the year.”

Data traffic increased 13.1% in the period and accelerated to 17.9% in the second quarter.

Quarter-on-quarter, data traffic was up 12.6%. “We added 1.1 million data customers in the period, reaching 22.8 million customers, up 2.4%. Smart devices were up by 11.1% to 24.5 million while 4G devices increased by 21.5% to 17.2 million. The average usage per smart device increased by 7.3% to 2.2GB per month,” said Shameel Joosub, Vodacom Group chief executive officer.

In November, the group announced a major step forward in scaling its fibre offering in South Africa. Through the acquisition of a 30% stake in Community Investment Ventures Holdings (CIVH) fibre assets, Vodacom said it will gain exposure to  fibre players including Vumatel and Dark Fibre Africa.

“Looking ahead, we are focused on the development of our diverse service offerings and M&A deal completion as we continue our exciting evolution from a telco to a techco. In the face of continued data demand and the uncertainty of the ongoing pandemic, we are encouraged by ICASA’s proposed licensing of provisional spectrum in South Africa,” said Joosub.

Group capital expenditure for the reporting period amounted to R6.9 billion, with R5.6 billion invested into South African operations.

“In the current financial year, we will invest more than R10.5 billion into our world-class network, in addition to the R47 billion we spent over the past five years alone. This is particularly relevant at a time when many of our customers continued to work, entertain, and educate from home,” said Joosub.

Read: Vodacom acquires stake in Vumatel and Dark Fibre Africa

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Vodacom targets diverse revenue streams amid dip in interim earnings