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New acquisition Vodafone Egypt boosts Vodacom’s revenue

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 13 Nov 2023
Shameel Joosub, Vodacom Group CEO.
Shameel Joosub, Vodacom Group CEO.

Telecommunications giant Vodacom Group has posted revenue of R72.8 billion, up 35.5%, positively impacted by the acquisition of Vodafone Egypt.

This emerged when the company today announced its interim results for the six months ended 30 September.

The group reported service revenue growth of 42.2%, or 7.9% excluding Vodafone Egypt. Vodacom acquired a 55% controlling stake in Vodafone Egypt for R41 billion in November last year.

Financial services revenue increased 39.9% to R6.2 billion, contributing 10.5% to group service revenue.

The firm declared an interim dividend of 305c per share.

Shameel Joosub, Vodacom Group CEO, says: “The encouraging revenue trend highlighted in the Vodacom Group’s performance in the first three months of the financial year continued into the second quarter – highlighting a strong operating performance.

“However, higher interest rates, elevated levels of inflation and currency volatility across our markets had an impact on the group’s earnings.”

Joosub adds that in South Africa, Vodacom not only responded to the country’s power crisis with an increased investment in network resilience, but has also recently concluded a landmark agreement with Eskom in the form of a “Virtual Wheeling Platform” that aims to drive private sector investment into new energy generation.

“Given our commitment to making a positive impact on the country’s power grid and renewable energy mix, our agreement with Eskom serves as a blueprint for other corporates to adopt.

“I’m particularly pleased with accelerated growth driven into our financial services portfolio by an ever-expanding mobile money ecosystem, Vodafone Egypt’s performance and the resilience of Vodacom South Africa, which substantiates our massive network investments so that we keep customers connected through extended periods of load-shedding.”

According to Joosub, these elements contributed to the 35.5% increase in group revenue to R72.8 billion, with Vodafone Egypt providing the biggest boost to growth, given it did not form part of Vodacom Group’s first half performance in the past financial year.

Load-shedding fight

He notes revenue from new services, such as financial and digital services, fixed and internet of things (IOT), contributed R11.7 billion, equivalent to 19.8% of group service revenue, almost one-fifth of the group’s total revenue, and is well on track to reach the firm’s target contribution of 25%-30% over the medium-term.

“Our R4.5 billion investment over four-and-a-half years to mitigate the impacts of load-shedding continues to show a return in South Africa, where we also committed, at the South Africa Investment Conference, to spend R60 billion in five years.”

Joosub points out these investments have already resulted in network availability during elevated levels of power outages and ultimately contributed to the 4% increase in service revenue in South Africa, the firm’s largest market.

He explains that revenue growth in SA was supported by the company’s consumer contract segment, growth in fixed and financial services and a resilient performance in the prepaid segment, despite ongoing macro-economic challenges associated with inflation and load-shedding.

“Supported by our investment in network resilience, data traffic growth accelerated to 45.2% in the period.”

New services in South Africa, such as financial and digital services, fixed and IOT, were up 18.1% and contributed R5.1 billion to revenue.

Revenue from financial services grew 10.8% to R1.6 billion due to a strong performance from insurance business.

“Our super app, VodaPay, continues to gain traction, with more than 7.6 million downloads and 4.1 million registered users,” says Joosub.

Vodafone Egypt, the largest acquisition in Vodacom Group’s history, delivered service revenue of R14.3 billion and contributed 24.1% of group service revenue, despite challenging macro-economics.

The company says the performance was supported by strong growth in data revenue, customer engagement and content integration.

Vodafone Egypt ended the period with 47 million customers, up 5.5%. Financial services revenue doubled to R804 million, or 5.6% of Vodafone Egypt’s service revenue.

“Pleasingly, Vodafone Egypt contributed to group earnings per share in the period, despite a devaluation of the Egyptian pound since we announced the acquisition in November 2021,” Joosub notes.

“Our international business segment − which comprises the DRC, Lesotho, Mozambique and Tanzania − reported service revenue up 16.6% to R14.7 billion, with customers up 22.3%. Strong growth of data revenue and M-Pesa revenue, which were up 34.9% and 26.8%, respectively, was offset somewhat by pressure associated with Mozambique’s price transformation programme.”

Financial inclusion

Joosub points out M-Pesa revenue growth was driven by continued customer and service adoption.

The strong performance in data revenue was underpinned by increased smartphone adoption and accelerating 4G network rollout, he adds.

“Safaricom delivered excellent results in Kenya, while our Ethiopian greenfield rollout is progressing as expected. Service revenue in Kenya accelerated to 8.5%, supported by growth in the fixed business and an improved performance of M-Pesa revenue, which grew 16.5%. Further, Safaricom Kenya reported excellent EBITDA growth of 13%, supporting an upgrade to its guidance.”

According to Joosub, the recently launched Ethiopian business, Safaricom Ethiopia, has made good progress since its commercial launch in October 2022, already reaching 4.1 million customers.

“More recently, we launched M-Pesa, which will no doubt be a game-changer in boosting financial inclusion and economic growth in Africa’s second most populous country. At a Vodacom Group level, Safaricom contributed R1.5 billion to operating profit, declining marginally at 1.1%. This was an encouraging outcome, given that we expect Safaricom Ethiopia EBITDA losses to peak in the current financial year.”

From a mergers and acquisitions perspective, he says, the Competition Commission recently announced its recommendation to the Competition Tribunal to not recommend Vodacom’s proposed purchase of the 30% stake in Maziv.

“We are hopeful the next step in the process, namely the Competition Tribunal process, will yield a different result. I firmly believe the transaction will foster economic development and help bridge South Africa’s digital divide in some of the most vulnerable parts of its society.”