SA's largest cellular operator, Vodacom, needs to diversify its revenue stream if it is to continue growing its top and bottom line at the same rate as in the first half of this year.
The group, which this morning presented its interim results for the six months to September, is actively looking for new opportunities in Africa and is investing in its data operations in a bid to grow revenue.
In the first half of the year, Vodacom reported group service revenue up 6.9%, to R29.7 billion, as total active customers leapt 20.8%, to 50.1 million. The company said headline earnings per share were 396c, compared with 324c a year ago.
Scouting around
However, CEO Shameel Joosub says the group is facing inflationary, regulatory and competitive pressures and needs to expand its current African footprint and grow its existing operations on the continent to continue growing revenue at the same rate. Revenue grew above Vodacom's guidance of low single digits.
Joosub says the company is actively looking at opportunities in Africa and is now in a better position to search for acquisitions as its international units have reached a critical turning point in terms of profitability.
Its international operations gained 36.5%, to R6 billion, contributing 20.2% to total revenue, up from 16.9% a year ago. Joosub says the revenue gains were driven by increased scale and a 19.2% gain in its international subscriber base, which is now 19 million.
The cellular company has operations in Tanzania, the DRC, Lesotho and Mozambique and entered the continent in 2000. Its African operations were problematic for a while, but have been turned around, and made their first contribution to cash flow in the year to March.
Choosing the best
Although greenfields opportunities are "few and far between", Vodacom is looking at medium-sized acquisitions in countries that have a population of more than 10 million, says Joosub. He says there may be opportunities to cherry pick units from a company that is selling, and has a footprint in more than one country.
Joosub adds that prices now are more realistic than the anticipated value on the back of the Bharti-Zain deal a few years ago. He says, while Vodacom is actively looking, "there is nothing to talk about yet".
Vodacom expects the contribution from its international unit, as a percentage, to increase, but this depends on its ability to expand in Africa and grow in its current geographies, where data and mobile money offer growth potential, says Joosub.
The operator sees data as a growth driver across its units. In the first half of the year, total voice revenue gained 7.3%, to R17.6 billion, while data grew 20.2% to contribute 16% of Vodacom's service revenue.
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