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Vodacom’s fintech move pays off with record R2bn revenue

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Vodacom’s aggressive play in financial services is paying off, as the company has turned the previously loss-making unit into a cash cow.

Vodacom today released its key financial metrics for the quarter ended 31 December 2021, saying financial services remain a clear strategic priority for the group and the business unit continues to gain momentum.

“This is evidenced by the 12.5% increase in financial services revenue to breach the R2 billion mark for the first time in a quarter. Our M-Pesa platform, including Safaricom, continues to scale at an impressive rate, with transaction values up 16.1% to exceed R430 billion per month,” says Shameel Joosub, group CEO.

In South Africa, he says, the launch of the company’s VodaPay super app in October last year exceeded expectations by attracting 1.4 million downloads and one million registered users in its first three months.

“We see VodaPay as a precursor to M-Pesa’s evolution and further strengthening our fintech position across our footprint,” Joosub says.

The growth of Vodacom financial services comes as the telco has set its sights on becoming one of Africa’s top fintech players, targeting over 70 million customers in the next three years.

Vodacom is evolving from a telecoms company to a technology company, while expanding its ecosystem of products, a move that allows Vodacom to diversify its revenue streams.

Its revenue in the third quarter ended December was up 6.4%, driven by a sustained demand for connectivity and the growth of new services, which includes financial and digital services, internet of things and fixed.

Joosub says: “Our service revenue growth of 4.4% on a normalised basis was in line with the group’s medium-term target and supported by a resilient performance in SA on the back of sustained investment in technology and our network to further enhance customer experience.”

Additionally, he notes, supported by Vodacom’s continued focus on financial inclusion and accelerated capital expenditure, service revenue for its international operations grew 6.7% to R5.9 billion, or 3.5% on a normalised basis.

“The reported growth was underpinned by a 12.9% increase in M-Pesa revenue and a 21.2% rise in data revenue. Tanzania’s financial performance and progress in driving financial inclusion was impacted by government levies imposed on mobile money and airtime recharges.

“A key focus for our international portfolio is digital inclusion, which will be supported by our growing 21.5 million data customer base and driving higher smartphone adoption, with international customers on smartphones at 12 million.”

Detailed plan for the future

Further, Joosub says, the group remains committed to focusing on the economic recovery in markets where it operates through the execution of a purpose-led six-point plan.

“This plan includes expanding network coverage and resilience, accelerating support to governments, enhancing digital accessibility and digital adoption, supporting our customers as they adapt to new ways of working and promoting financial inclusion.”

Commenting on Vodacom’s two strategic acquisitions announced in November last year – a majority interest in Vodafone Egypt and a strategic stake in the fibre assets of Community Investment Ventures Holdings (CIVH) − Joosub says the two will be instrumental in his plan.

“It is particularly pleasing that our minority shareholders recently overwhelmingly voted in favour of the R41 billion Vodafone Egypt transaction, as this presents significant diversification and growth opportunities for shareholders in a substantial and largely unbanked market and is expected to be transformational in our evolution from a telco to a techco.

“This approval represents an important milestone in our target to close the transaction by 31 March 2022. However, the transaction remains subject to regulatory approvals, including from the National Telecom Regulatory Authority of Egypt and Egypt’s Financial Regulatory Authority.”

On the CIVH fibre transaction, he points out that to accelerate Vodacom’s purpose of connecting people by facilitating an ambitious fibre rollout programme, the acquisition will assist it in narrowing the digital divide by enabling affordable access to connectivity in some of the most vulnerable parts of society.

Vodacom has since submitted regulatory filings in respect of the transaction to the Competition Commission and ICASA, respectively, initiating a process to obtain regulatory approval.

Turning to the contentious spectrum allocation matter, he notes the assignment of additional spectrum in South Africa will be instrumental in extending coverage, improving quality of service and lowering the cost to communicate, all of which are expected to support economic growth.

Yesterday, Vodacom, Cell C, MTN, Telkom, Rain Networks and Liquid Telecoms tendered applications for the spectrum, marking a milestone towards the auctioning of spectrum.

“With the auction scheduled for March 2022, we are working with government, ICASA and the other telecommunication operators in SA to unlock this economic tailwind and avoid further delays. The allocation of high-demand spectrum remains a key strategic priority for the group,” says Joosub.

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