Vodafone Egypt propels Vodacom in full-year results

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 13 May 2024
Vodacom says it has surpassed the 200 million customer mark.
Vodacom says it has surpassed the 200 million customer mark.

South Africa’s biggest mobile operator Vodacom Group posted revenue of R151 billion, up 26.4%, for the year ended 31 March.

The company says the revenue gain was positively impacted by the acquisition of Vodafone Egypt. In 2022, Vodacom acquired a 55% controlling stake in Vodafone Egypt, in a R41 billion deal.

Group service revenue growth was 29.1%, and including Egypt on a pro-forma basis, was 9.2%.

“Our acquisition of [Vodafone] Egypt contributed significantly to the 29.1% increase in group service revenue, supported by a resilient performance in our largest market, South Africa,” says Shameel Joosub, Vodacom Group CEO.

“A 6.4% increase in net profit showcased the robustness of our strategy and our execution track-record of adapting to changes in our operating environments, despite elevated global economic pressures.”

In the year the company celebrates its 30th anniversary, Joosub says Vodacom also surpassed the 200 million customer mark.

“These are two particularly gratifying milestones in Vodacom's history. Our customer base is evenly split across our segments, which include South Africa, Egypt, international business and Safaricom, showcasing the breadth of our footprint, which covers more than half a billion people across the continent.

“In aggregate, our new services, which include digital and financial, fixed and IOT [internet of things], reached a contribution of 20% of group service revenue, as we also advanced our product diversification.

“Financial services is the key driver of our new services and a meaningful enabler of our purpose to connect for a better future. This is evidenced by the 11.8% increase in financial service customers to 78.9 million, as we now process $381.2 billion in annual transaction value.”

Ethiopian woes

According to Joosub, a combination of start-up losses in Ethiopia, higher finance and energy costs, the impact of absorbing inflationary pressures, and weaker exchange rates across markets, including the recent devaluation of the Egyptian pound, contributed to the 10.8% decline in headline earnings of 846 cents per share (cps).

“Reflective of our dividend policy of paying at least 75% of headline earnings, the board declared a dividend per share of 590cps for the year. Nonetheless, we expect that our efforts to diversify the group's footprint and product mix will unlock strong returns over the medium-term.”

Despite the economic backdrop, Joosub says the company remains committed to spending 13% to 14.5% of its overall revenue on capital expenditure, which ultimately results in an enhanced customer experience through sustained investments in technology and network infrastructure.

“This has and will continue to enhance network resilience through the acceleration of 5G coverage, our rural coverage programme to help bridge the digital divide and keep customers connected despite the power challenges across key markets.”

Shameel Joosub, Vodacom Group CEO.
Shameel Joosub, Vodacom Group CEO.

In South Africa, the firm says service revenue growth of 2.6% was largely on the back of new services, the consumer contract segment and prepaid mobile data. This was partly offset by pressure in Vodacom Business, as a shift away from work from home policies saw corporate customers recalibrating their spend, Joosub explains.

New services in SA were up 11.2% and contributed R10.2 billion, or 16.6% of service revenue.

“The 7.9% service revenue increase from financial services to R3.2 billion was largely driven by our insurance business and payments, while Airtime Advance remained an important enabler of digital inclusion,” says Joosub.

“The traction and transaction volume growth that our VodaPay super-app continues to attract is particularly pleasing, having ended the period with 10.4 million downloads and 5.8 million registered users, reflecting an increase of 83% and 79.4%, respectively.”

From an infrastructure investment perspective, Joosub notes Vodacom spent R11.1 billion to support network resilience, leverage its new spectrum assets and enhance IT platforms.

He adds that the proposed purchase of a joint venture stake in South African fibre company Maziv will enable affordable access to connectivity in some of the most vulnerable parts of the country through an ambitious fibre rollout programme, assisting in narrowing the country’s digital divide.

The transaction is subject to a review by the Competition Tribunal, with hearings due to commence on 20 May.

According to the telecoms firm, Egypt now services 48.3 million customers − an increase of 6.2% − and contributes one-quarter of group revenue supported by financial services platform Vodafone Cash.

“We are encouraged by the meaningful steps taken by Egypt's government to support economic growth through foreign direct investment and foreign exchange liquidity. Pleasingly, the dividend declared by Egypt to the group in the first half of the financial year was repatriated to South Africa in March 2024.

“Our international business in DRC [Democratic Republic of Congo], Lesotho, Mozambique and Tanzania produced a reported 13.1% increase in service revenue, supported by foreign exchange tailwinds, a 21.4% increase in M-Pesa revenue, and a 30.5% rise in data revenue.”

Joosub points out that Tanzania delivered strong double-digit growth, DRC's service revenue growth improved in the second half, while Mozambique's performance disappointed with a service revenue decline of 12.5%.

“We expect recent regulatory reforms in Mozambique will meaningfully improve our prospects in that market.”

M-Pesa boom

Across the four markets, M-Pesa revenue grew 21.4%, contributing 26.5% of international business service revenue.

This was boosted by a strong performance in Tanzania, while new growth areas such as lending and savings products continue to gain traction across the portfolio, as Vodacom facilitated loans worth R16.9 billion, more than doubling year-on-year.

Safaricom delivered an excellent performance in Kenya, with service revenue accelerating in the second half to end the year with growth of 13.4%, boosted by double-digit growth in mobile data and M-Pesa revenue, says Vodacom.

M-Pesa transaction volumes increased 34.8%, showing the scale of the business. Despite start-up costs associated with operations in Ethiopia, Safaricom has confirmed its rollout is on track in Africa’s second most populous country, says Joosub.

“Of the many purpose-led initiatives that we led over the past year, I am particularly proud of m-mama, Code like a Girl and Je Suis Cap. With the support of partners like USAID and the Vodafone Foundation, these initiatives are expanding across our markets to change lives.

“While the global economic outlook is uncertain, we are encouraged by the recent macro reforms in Egypt and Kenya. Building on this momentum, our portfolio of products positions us to deliver on our purpose and capture the structural growth opportunities across our markets, while also supporting an upgraded outlook for group service revenue growth.

“Delivering on this outlook will require an unwavering focus to deliver our strategy, to meet our business objectives and to serve our customers,” he concludes.