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Vodacom rakes in R1.8bn from new venture Vodafone Egypt

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 31 Jan 2023
Vodacom Group CEO Shameel Joosub.
Vodacom Group CEO Shameel Joosub.

Lifted by the newest addition to its stable, Vodacom Group has reported a healthy revenue increase in the third quarter of 2023, saying it anticipates Vodafone Egypt will play a transformative role in future.

Vodacom today reported its financial performance for the period, citing the beneficial effect its new acquisition, Vodafone Egypt, had on the group.

This is the first set of results that includes revenue from what Vodacom anticipates to be a meal-ticket for the group.

Vodacom Group took control of Vodafone Egypt in a R43.6 billion deal sealed in November, after it received regulatory approval to acquire a 55% controlling stake in Egypt’s telecoms market leader.

Vodafone Egypt holds a 43% revenue market share, and has 43 million consumer and enterprise customers.

The transaction was settled through the issuance of 241 976 243 new group shares and €577 million (equating to R10.8 billion) cash.

This was the largest transaction in Vodacom Group’s history, as the telco set in motion its plans to diversify and accelerate growth.

Vodacom today announced the deal is proving rewarding, as it “positively impacted” group revenue, which increased 14.8% to R30.7 billion in the quarter.

“Vodafone Egypt was consolidated from 8 December 2022, contributed over R1.8 billion to group service revenue and was a key factor, alongside currency gains and operating model resilience, in the 16.1% improvement in our service revenue, despite ongoing financial market volatility and weaker prospects for the global economy,” says Shameel Joosub, Vodacom Group CEO.

“The 4.7% increase in normalised group revenue – which strips out currency fluctuations and the impact of Vodafone Egypt’s acquisition – underscores the ongoing resilience of the group’s portfolio at a time when economic uncertainty prevails in the face of the war in Ukraine and the supply chain impacts of the COVID-19 pandemic.

“In addition to delivering value to shareholders by ensuring the smooth integration of Vodafone Egypt into the Vodacom Group, we remain firmly focused on our purpose of connecting people for a better future and, in particular, assisting customers impacted by cost of living constraints.”

Joosub says the Vodafone Egypt acquisition presents a unique opportunity to advance Vodacom’s strategic connectivity and financial services ambitions through one of Africa’s top telecoms operators.

“Vodafone Egypt is a clear market leader, with 43.5% mobile revenue share based on our estimates, and is strategically positioned to capture growth in a fast-growing information and communications technology market.

“Vodafone Egypt’s market leadership is supported by its strong brand, spectrum portfolio, network leadership and advanced customer segmentation capabilities.”

In other metrics reported in the period, South African service revenue grew 3%, supported by a strong performance in mobile prepaid.

Vodacom’s international service revenue surged 18%, driven by data revenue growth and a weaker rand, while financial services revenue jumped 30.6% to R2.6 billion, with VodaPay super app downloads reaching 4.5 million.

Stamping ground

In SA, Vodacom’s home-market, the telco says new services − such as financial and digital services, fixed and IOT − were up 9.9% and contributed R2.3 billion, or 15%, of local service revenue.

Mobile contract customer revenue increased 3.1% to R5.7 billion, supported by improved growth in the Vodacom consumer segment.

Joosub comments: “Growth in the consumer segment benefited from strong demand for data services and the contract price increases of between 3% to 5% implemented in the first quarter of the financial year.

“Mobile contract average revenue per unit (ARPU) of R299 was flat, with the price increases offset by repricing pressure associated with the government contract for mobile services (RT15) within Vodacom Business. We added 132 000 contract customers in the quarter, with a base of 6.7 million, up 4.6%.”

In the prepaid segment, Joosub says Vodacom delivered a good result given the challenging macro backdrop associated with higher inflation and power availability challenges.

“Mobile prepaid revenue growth accelerated to 3.7% from 2.7% in the second quarter and was underpinned by best-in-class network availability and our summer campaign as we leveraged our advanced customer value management capabilities to drive engagement and increase usage. Prepaid ARPU of R61 was up 7%, while subscriber growth was impacted by a clean-up of 1.1 million non-revenue-generating content customers.”

In the period, data traffic growth in SA accelerated to 39.3%. Data customers were up 9% to 25.5 million, representing 70.6% penetration of Vodacom’s one-month active customer base, says Joosub.

“Smart devices on our network were up by 13% to 29.5 million, while the average usage per smart device increased 27.4% to 3.2GB per month. The number of 4G devices on our network increased 11.4% to 19.2 million. Prepaid data revenue of R3 billion was up 14%.”