Vodacom Group has kicked off its 2027 financial year with stronger revenue growth, buoyed by an improving performance in South Africa, continued momentum in Egypt and robust expansion of its financial services business.
In a trading update for the quarter ended 30 June, the telecommunications operator reported group revenue of R42.4 billion, up 5.9% year-on-year despite the impact of a stronger rand on its international operations.
Group service revenue increased 6.3%, while normalised service revenue growth accelerated to 12.6%, tracking ahead of the company’s medium-term growth target.
South Africa, Vodacom’s largest market, delivered 2% service revenue growth, supported by an improved performance in the prepaid segment, indicating a recovery in a business that has faced pressure from consumer spending constraints and intense competition.
Outside South Africa, Egypt remained the standout performer, with service revenue climbing 32.8% in local currency. The operator’s financial services business in Egypt expanded even faster, recording 73% revenue growth.
Vodacom’s international operations also continued to gather momentum. International business service revenue rose 4.1% in rand terms, while normalised growth reached 14%, reflecting stronger underlying demand once currency fluctuations are excluded.
Financial services remained one of the group’s fastest-growing businesses. Revenue from the segment increased 17.8% to R4.5 billion, with normalised growth accelerating to 27%.
Across its mobile money platforms, including Safaricom’s M-Pesa business, Vodacom processed $547.9 billion in transactions over the past 12 months.
The quarter also marked the completion of Vodacom’s transaction involving Safaricom, which became effective on 30 June. Following the deal, the group upgraded its medium-term financial guidance, enhanced its Vision 2030 ambitions and updated its dividend policy.
Safaricom milestone
“This quarter marked a defining moment for Vodacom with the completion of our acquisition of a controlling stake in Safaricom, increasing our shareholding from 35% to 55%, effective 30 June,” says Shameel Joosub, Vodacom Group CEO.
“This strategically important transaction represents a major milestone in our Vision 2030 journey, significantly enhancing the group’s scale, diversification and long-term growth prospects.
“We are now entering a new phase of growth, supported by a more balanced portfolio, broader earnings drivers and increased exposure to some of Africa’s most attractive opportunities in connectivity, digital services and financial inclusion. Reflecting this stronger growth profile, we have upgraded our medium-term EBITDA [earnings before interest, taxes, depreciation and amortisation] and operating free cash flow growth targets from double-digit to early-teens growth.
“In addition to these upgraded targets, the strength of our diversified portfolio and sustained operational momentum across the business gives us the confidence to raise our Vision 2030 group revenue ambition from more than R200 billion to more than R300 billion.
“The transaction also materially expands the scale of our financial services footprint, increasing the contribution of financial services to group service revenue from 13% to more than 22%, further reinforcing our leadership in African fintech. Our first-quarter performance highlights the benefits of our diversification strategy, with strong contributions from Egypt and our international business reinforcing the resilience and balance of our portfolio.”
Joosub adds that group revenue increased 5.9% to R42.4 billion and service revenue rose 6.3% to R34.3 billion, supported by growth in financial services revenue, which increased 17.8%.
“While the strength of the rand created translation headwinds, the robust underlying local currency performance across our markets underscores the structural momentum within the business.
“Normalised group service revenue growth of 12.6% remains on track to deliver our medium-term ambition of double-digit growth. Egypt once again delivered an exceptional performance, achieving service revenue growth of 32.8% in local currency, supported by our investments into spectrum and network.”
He points out that South Africa delivered a stable performance with service revenue growth of 2%.
“Pleasingly, our South Africa prepaid segment returned to growth in the quarter, reflecting the positive impact of the actions we have taken to improve value and simplify propositions. Our international business continued its good momentum into the first quarter, with normalised service revenue increasing 14%, supported by strong contributions from Tanzania, DRC and Lesotho.”
According to Joosub, beyond mobile services remained a key growth driver, contributing R7.8 billion, equivalent to 22.8% of group service revenue.
“Financial services remains the largest component of beyond mobile and a key strategic growth engine. Including Safaricom, we process an impressive $547.9 billion of mobile wallet transaction value annually, up 19.1%.
“In fixed, we advanced our strategy in South Africa by investing a further R0.8 billion in Maziv to support the completion of the Herotel transaction. We believe Maziv is well-positioned to accelerate fibre reach in South Africa, fostering economic development and helping bridge South Africa’s digital divide.”
Increased earnings mix
From a portfolio perspective, he notes the consolidation of Safaricom represents a fundamental step-change in Vodacom’s scale, diversification and growth profile.
Joosub says the group will operate with a more balanced and diversified portfolio, with meaningful earnings contributions across four segments: a cash-generative South African operation, alongside higher-growth businesses in Safaricom, Egypt and the international business.
“As our earnings mix increasingly shifts towards faster-growing markets and beyond-mobile services, we have a greater opportunity to reinvest capital at higher rates of growth and attractive returns, while continuing to strengthen the balance sheet.
“This is reflected in the group’s upgraded medium-term growth targets for EBITDA and operating free cashflow. Against this enhanced growth trajectory, the board has reviewed our capital allocation framework to ensure flexibility and an appropriate balance between investing in network infrastructure, scaling digital and financial services, progressive deleveraging and delivering attractive shareholder returns.
“Accordingly, the board has decided to update the dividend policy to a payout of at least 65% of headline earnings. At this revised payout level, we expect to grow the dividend per share for FY2027, based on our current growth trajectory and the prevailing economic conditions.
“Following the completion of milestone transactions, Maziv and Safaricom, Vodacom has shaped its strategy for the future. Our focus now shifts to unlocking the full potential of our portfolio through disciplined execution, innovation and capital allocation.
“Guided by Vision 2030, we are well-positioned to deliver sustainable growth and attractive returns. I am confident the actions we are taking today will create long-term value for shareholders, while advancing our purpose of connecting people for a better future.”
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