Vodacom, South Africa’s biggest mobile network operator, reported a strong financial performance for the first quarter, with group revenue rising 10.6% to R40 billion.
This emerged today when the JSE-listed company published a trading update for the quarter ended 30 June.
Vodacom says service revenue grew 3% in South Africa, driven by the contract segment. Egypt stood out with a 43.8% increase in service revenue in local currency and a 55.1% surge in financial services revenue.
The group’s international operations saw service revenue climb by 9.7%, with normalised growth reaching 12.4%.
Overall, financial services revenue across the group rose by 18.1% to R3.9 billion, as Vodacom processed transactions worth $460 million.
Shameel Joosub, Vodacom Group CEO, says: “Encouraging trends from Vodacom Group’s first quarter performance support the confidence we communicated in May this year, when we upgraded our financial targets, signalling that the organisation is poised for stronger growth in the medium-term.
“These trends include strong revenue and service revenue growth in rand terms, a healthier performance trajectory by our international business, good growth in the contract segment and beyond mobile services in South Africa, and another all-round excellent performance by Egypt.”
Diversification pays off
Despite an uncertain global environment, Joosub notes the group’s strategy to diversify revenue growth by product and geography continues to pay dividends, evidenced by the 10.6% growth in revenue to R40 billion.
“Egypt remains a star performer, having grown service revenue at 43.8% in local currency, well above the rate of inflation. South Africa delivered a resilient 3% increase in service revenue, while Tanzania, DRC and Lesotho were the significant contributors to the 12.4% growth in international business.
“Service revenue from our beyond mobile services was a key growth driver and contributed R6.9 billion in the quarter, which equates to 21.4% of the group and is well on track to reach our target contribution of 30% by 2030.”
According to the CEO, financial services remain a clear strategic priority for the group and is the largest component of beyond mobile services.
“Including Safaricom, we now process $460 billion in mobile wallet transaction value annually, which underscores the impact and scale of this business.”
Joosub points out that this is a 14.9% increase in transaction value over the past 12 months. “The sustained growth of our financial services is particularly pleasing as this seeks to deepen financial inclusion through an increasing portfolio of services that already includes insurance, loans, savings, international money transfer and merchant services.”
He explains that group financial services revenue of R3.9 billion was supported by strong growth from the insurance business in South Africa, excellent growth in Egypt of 44.3% (55.1% in local currency) and a 17.4% (20.8% normalised) increase from international business on the back of an improved performance in Mozambique.
More capex investments
Looking at the firm’s geographic segments, Joosub notes that South Africa’s results were supported by a strong performance in the contract segment and good growth in financial services, fibre and cloud services, offsetting a marginal decline in the prepaid segment.
Supported by additional data allocations, he adds, good growth in smart devices and significant investments in the network, data traffic grew 32.7%.
Having invested R1.6 billion in the quarter, the telco expects to invest around R12 billion capital expenditure in the current financial year to further enhance customer experience.
“Looking ahead, we’re focused on delivering on our Vision 2030 targets, which include growing our customer base to 260 million and our financial services customer base to 120 million.”
Core to this strategy will be accelerating mobile and fixed connectivity, scaling handset financing and the roll-out of innovative digital and financial services in all markets, Joosub states.
“We will also seek to expand our partnerships across Africa to power Vodacom’s growth, drive infrastructure sharing to increase rural and fibre connectivity and expand the reach of our ‘Tech for Good’ solutions. I firmly believe Vodacom is ideally positioned to capture the structural growth opportunities across our markets, while at the same time delivering on our purpose of connecting people to a better future,” he concludes.
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