JSE-listed Vodacom has hit a record 250 million subscribers, an 11.8% gain, and says in its interim results to September that it is on track as it moves closer to its 2030 target of 275 million customers.
Of its record 250 million subscriber figure, 108 million are financial services customers, with revenue from this unit increasing 99% to R15.9 billion, or 19.2% when adjusted to account for Vodacom’s 55% stake in Safaricom.
During the six months, South Africa’s largest cellular operator increased its effective stake in the Kenyan telecommunications company from 35% to 55%, giving it a majority shareholding.
Group CEO Shameel Joosub notes the results were “one of Vodacom’s strongest six-month performances to date”. It exceeded its medium-term growth target on service revenue, earnings before interest, tax, depreciation and amortisation (EBITDA), and operating free cash flow, while also reaching the record milestone of serving a quarter of a billion customers across Africa.
In the period under review, Vodacom grew group revenue 25.6% to R102.5 billion, which was aided by the consolidation of Safaricom, while service revenue increased 29.4%. EBITDA grew 40% to R42.7 billion, while headline earnings per share rose 25.7% to 587c.
Dial M for money
Joosub adds that the company continues to make good progress against its Vision 2030 strategy. “The momentum we are seeing across customer growth, smartphone adoption, financial services and beyond mobile services reinforces our confidence in the significant opportunity ahead,” he says.
The listed company declared an interim dividend of 355c per share, up 7.6%, in line with its revised dividend payout policy, which dropped from 75% of headline earnings to 65% in July so it could invest in its infrastructure and grow its financial services portfolio.
Joosub says the mobile network operator continues to invest “with discipline behind the infrastructure and platforms that will drive Vodacom’s next phase of growth” and its R13.3 billion spend during the period expanded network capacity and enhanced data, financial services, digital platforms and fixed connectivity.
Over the last 12 months, it has built 3 388 new 4G and 4 328 new 5G sites across the group. “These investments are strengthening the quality and resilience of our growth by broadening the ways we serve customers and monetise our scale.”
Joosub notes that regional performance was led by “outstanding” results from Egypt and Safaricom, continued momentum across its international business portfolio and a resilient contribution from South Africa.
Vodacom operates across eight African markets: South Africa, Egypt, the Democratic Republic of Congo, Lesotho, Mozambique, Tanzania, Kenya and Ethiopia. Its East African presence is strengthened through its investment in Safaricom, through which it has operations in Kenya and Ethiopia.
Call me maybe
“Financial services remains one of the most compelling elements of the Vodacom investment case and increasingly one of the group’s most important growth drivers. The combination of Vodacom and Safaricom creates one of the continent’s largest fintech platforms,” says Joosub.
Kenya’s High Court recently declared the Kenyan government’s sale of its 15% stake in Safaricom to Vodacom’s subsidiary, Vodafone Kenya, null and void.
It ruled that the divestiture was unconstitutional because of inadequate public participation, concealment of material information, an arbitrary pricing process and unresolved national-security concerns because of the transfer of effective control to foreign investors.
Joosub says “an expedited appeal is underway” with the Court of Appeal in Nairobi having ordered that the status quo be maintained. This, he says, means “we remain the registered shareholder of the shares pending the outcome of the appeal”.
He adds that “our confidence in the strategic rationale of the transaction remains unchanged”.
Africa calling
Joosub adds that Egypt is a key growth engine, while Ethiopia is nearing EBITDA break-even. “Our international business maintained strong momentum,” he says, noting that it achieved normalised service revenue growth of 13.7% and EBITDA growth of 15.9% in constant currency, which strips out forex movements.
This was “underpinned by strong performances in Tanzania, DRC and Lesotho,” says Joosub.
“In South Africa, we delivered on our commitment to return prepaid to growth, with higher data consumption underpinning a recovery in the segment. We combined this improved commercial performance with disciplined cost optimisation, expanding South Africa’s EBITDA margin to 37.4%, the highest level in several years,” says Joosub.
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