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Vodacom’s latest financials show that the company is struggling to see strong growth in rand terms across its markets. <\/p>\n\n\n\n
“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.<\/p>\n\n\n\n
“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.” <\/p>\n\n\n\n
That said, on a non-normalised basis, group service revenue actually dipped by R14 million to R28.962 billion. <\/p>\n\n\n\n
Overall, group revenue increased by a tiny 1.5% to R36.2 billion. <\/p>\n\n\n\n
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. <\/p>\n\n\n\n
Financial services are the largest component beyond mobile services, with the group processing $400 billion in mobile wallet transaction value annually. <\/p>\n\n\n\n
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. <\/p>\n\n\n\n
Across the group’s geographies, Egypt saw service revenue grow 43.7% in local currency\u2014far above the rate of inflation. <\/p>\n\n\n\n
However, when accounting for the Egyptian pound devaluation, service revenue actually dropped by 7.2% in rand terms. <\/p>\n\n\n\n
South Africa only saw a 1.8% increase (CPI: 5.2% in May).<\/p>\n\n\n\n
“South Africa\u2019s results were boosted by improved prepaid performance and price adjustments that delivered greater value to customers,” said the CEO. <\/p>\n\n\n\n
“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\u2019s service revenue of R15.3 billion.” <\/p>\n\n\n\n
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. <\/p>\n\n\n\n
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. <\/p>\n\n\n\n
Joosub said that Egypt’s strong performance was underpinned by clear NPS leadership and network differentiation, and it was ranked \u201cBest in Test\u201d by umlaut (part of Accenture). <\/p>\n\n\n\n
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. <\/p>\n\n\n\n
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%. <\/p>\n\n\n\n
“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.<\/p>\n\n\n\n
“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. <\/p>\n\n\n\n
“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.” <\/p>\n\n\n\n
“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.”<\/p>\n\n\n