Vodacom comes in flat

 ·24 Jul 2024

Vodacom’s latest financials show that the company is struggling to see strong growth in rand terms across its markets.

“While the economic environment in recent years has been challenging, our strategy to diversify our revenue growth by product and geography is bearing fruit,” said CEO Shameel Joosub in a trading update for the quarter ended 30 June 2024.

“This is evidenced by the 10.0% growth in normalised (adjusted for currency shifts) group service revenue to R29.0 billion in the first quarter – exceeding our medium-term target – as well as the 16.8% increase in normalised Group financial services revenue to R3.3 billion.”

That said, on a non-normalised basis, group service revenue actually dipped by R14 million to R28.962 billion.

Overall, group revenue increased by a tiny 1.5% to R36.2 billion.

Joosub added that service revenue from beyond its mobile services contributed R6 billion over the quarter, equating to roughly 20.8% of the group total. The company is on track to hit its target of 25% to 30% over the medium term.

Financial services are the largest component beyond mobile services, with the group processing $400 billion in mobile wallet transaction value annually.

Group financial services revenue of R3.3 billion was primarily caused by rapid local currency growth of 87.0% in Egypt and strong growth in South Africa within Vodacom’s insurance and Airtime Advance segments.

Across the group’s geographies, Egypt saw service revenue grow 43.7% in local currency—far above the rate of inflation.

However, when accounting for the Egyptian pound devaluation, service revenue actually dropped by 7.2% in rand terms.

South Africa only saw a 1.8% increase (CPI: 5.2% in May).

“South Africa’s results were boosted by improved prepaid performance and price adjustments that delivered greater value to customers,” said the CEO.

“Supported by additional data allocations and good growth in smart devices, data traffic grew 31.3% while beyond mobile services increased by 6.3%, contributing R2.6 billion to South Africa’s service revenue of R15.3 billion.”

After investing R1.9 billion over the quarter, Vodacom plans to invest R11.5 billion of capital expenditure in the current financial year to “further enhance customer experience” in South Africa.

From a mergers and acquisitions perspective, the group is awaiting a Competition Tribunal ruling on its proposed acquisition of a 30% to 40% stake in South African fibre operator Maziv. The competition commission previously recommended that the deal not be pursued.

Joosub said that Egypt’s strong performance was underpinned by clear NPS leadership and network differentiation, and it was ranked “Best in Test” by umlaut (part of Accenture).

Commercial momentum was also strong in Egypt, with a 47.9% increase in financial services customers to 8.7 million and a 34.7% improvement in data traffic.

Egypt now accounts for 21.9% of the group’s total service revenue at R6.4 billion (Q1 2023: R6.7 billion), with the company ending the quarter with 47.4 million customers – up 6.1%.

“Across our International business, our investments into new spectrum in DRC, Mozambique and Tanzania and a 19.7% increase in 4G sites across the portfolio are evident in the 5.7% normalised growth in service revenue to R7.4 billion,” said Joosub.

“DRC delivered high single-digit US dollar growth, and Tanzania continued to deliver excellent local currency results, while normalised M-Pesa and data revenue growth was strong at 10.9% and 15.5%, respectively.

“Our International business customer base reached 55.0 million, up 6.4%, supported by strong commercial execution and a further R1.1 billion network investment in the quarter.”

“Data traffic grew by 29.6% while smartphone users were up 0.5 million in the quarter to reach 16.4 million as we look to accelerate smartphone penetration with innovative financing options, including a new daily repayment model.”


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