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Digital, financial, IOT anchor Vodacom’s half-year results

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

Buoyed by the success of new services − such as digital, financial and the internet of things (IOT) − Vodacom recorded strong revenue and profit growth in the six months ended September.

Vodacom released the details of its half-year performance today, saying these new services at group level amounted to R6.9 billion and contributed 17.6% of service revenue in the period. It is now targeting to have them contribute 25% to 30% of the telco’s service revenue in three years’ time.

Financial services delivered 22.7% growth on a normalised basis and IOT was up 39.3% on an adjusted basis, which Vodacom says was supported by products in agriculture and smart infrastructure.

In South African operations, new services, financial and digital services, fixed and IOT also delivered strong growth in the period, contributing R4 billion of service revenue.

Other key performance metrics in the period include normalised group service revenue and group operating profit growth of 5.4% and 5.7%, respectively.

Headline earnings per share declined 5.1%, but when adjusted for the one-off deferred tax rate adjustment in the prior period, grew 3%.

In the six months, the telco added 6.2 million customers, to serve a combined 129.9 million across the group, including Safaricom.

Vodacom declared an interim dividend of 420c per share, up 1.2%.

In SA, the mobile operator delivered service revenue growth of 3.6% driven by connectivity demand, an additional 1.1 million data customers, incremental wholesale revenue and growth in new services.

“This was an impressive result given the demanding comparative associated with lockdowns in the prior period,” says CEO Shameel Joosub.

“Vodacom Business delivered another strong performance in the period under review, with service revenue increasing by 11.5% to R8.5 billion, while revenue generated from financial services in South Africa increased by 15% to R1.3 billion.”

In the current financial year, Joosub says, Vodacom will invest more than R10.5 billion in its network, in addition to the R47 billion it spent over the past five years alone.

“This is particularly relevant at a time when many of our customers continued to work, entertain and educate from home.”

Good omen

In addition, Joosub notes Vodacom group’s decision to diversify geographic exposure continues to pay dividends.

“Our strategic investment in Kenya’s Safaricom in 2017 has proven to be value-accretive, generating an annual total shareholder return of 26%.

“Significantly, we recently announced two transformative acquisitions to further enhance the group’s growth and return profile. In Egypt, we intend to acquire a controlling share in Vodafone Egypt, a clear market leader with a track record of strong growth and attractive returns.”

Last week, the Midrand-headquartered telco announced it had agreed terms with Vodafone to take control of Vodafone Egypt for R41 billion, and will fund the acquisition by issuing 242 million new ordinary shares at R135.75 per share and R8.2 billion in cash.

Vodacom also revealed it had acquired a co-controlling equity stake in Community Investment Ventures Holdings’ (CIVH’s) fibre assets, in a deal that is set to hasten the telco’s plans to dominate SA’s connectivity market.

On the CIVH deal, Joosub says: “This transaction marks a major step forward in diversifying our connectivity offering, optimising our assets through sharing costs and accelerating fibre reach in South Africa to help bridge the digital divide.”

Looking ahead, Vodacom says it remains focused on creating a digital society with inclusion for all, as the telco delivers on its business strategy, Vision 2025.

“We believe this integrated approach, and our social contract with stakeholders, will support balanced economic progress across the countries in which we operate and provide us with compelling growth opportunities,” Joosub comments.

“We implement our strategy through our ‘system of advantage’, which is designed to grow with our customers, as we strive to be a strategic partner of choice and an integral part of their lives, homes and offices.”

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