In the interim results for the six months ending on September 30, 2023, Vodacom Group Limited has showcased robust financial performance, driven by a surge in group revenue to R72.8 billion, marking an impressive 35.5% increase. This substantial growth can be attributed to the strategic acquisition of Vodafone Egypt, which played a pivotal role in positively influencing the overall revenue figures.
The Group’s service revenue demonstrated a noteworthy expansion, recording a growth of 42.2%, or 7.9% excluding the impact of Vodafone Egypt. When considering Vodafone Egypt on a pro-forma basis (target comparable), the service revenue growth stood at 9.0%, aligning with the higher end of the medium-term target set by the company.
Furthermore, the Group’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) exhibited a robust growth of 35.1%, or 5.5% on a pro-forma basis. This financial performance reinforces Vodacom’s position in the market as a key player with sustained growth and profitability.
Vodacom’s extensive reach encompasses a total of 196.2 million customers across the Group, which includes Safaricom on a 100% basis. The financial services segment, including Safaricom, boasts a substantial customer base of 73.5 million, engaging in transactions totaling an impressive US$1 billion per day. Financial services revenue has notably increased by 39.9%, reaching R6.2 billion and contributing significantly to the Group’s service revenue, making up 10.5% of the total.
In line with its consistent policy, Vodacom has declared an interim dividend of 305 cents per share (cps). This dividend announcement underscores the company’s commitment to delivering value to its shareholders and maintaining a stable financial outlook.
Vodacom’s strong financial performance and strategic initiatives position the company as a leading force in the telecommunications sector, both regionally and globally. The acquisition of Vodafone Egypt and the continued growth in service revenue and EBITDA demonstrate Vodacom’s resilience and effectiveness in navigating the dynamic landscape of the telecommunications industry.
Shameel Joosub, Vodacom Group CEO gave his insight into the report as follows:
The encouraging revenue trend highlighted in the Vodacom Group’s performance in the first three months of the financial year continued into the second quarter – highlighting a strong operating performance. However, higher interest rates, elevated levels of inflation and currency volatility across our markets had an impact on the Group’s earnings. We remain committed to delivering on our purpose-led strategy that aims to enhance societal value and deliver value to our customers
We connect for a better future and focus on creating a digital society and ensuring inclusion for all, while mindful of the impact we have on our planet. Evidence of this commitment includes the recent recognition of our exceptional customer service – having being declared the winner of the Ask Afrika Orange Index Award – and Vodacom South Africa officially being named as the country’s ‘Most Reliable Network’ and ‘Best In Test’ ahead of competitors by independent benchmarking organisation ‘Umlaut’, which is part of Accenture. ‘Umlaut’ has also ranked Vodafone Egypt, Vodacom Mozambique and Safaricom as ‘Best In Test’, while customers across our markets have ranked Vodacom first in network Net Promoter Scores (NPS). Accolades aside, our substantial investments underpin our market leadership and value strategy for the 10.4 million new customers joining our network over the last 12 months to reach a total base of 196.2 million customers across our markets. We expect our investments to continue to fuel our growth into an addressable market of more than 500 million people.Shameel Joosub, CEO, Vodacom Group
In terms of purpose-led initiatives that deliver positive societal impact where we operate, education is a critical area in which Vodacom continues to make significant strides. By working together with regulators, governments and industry stakeholders, we can ensure that digital education enables all learners and teachers regardless of who they are, where they are and what they can afford, to access quality education and, ultimately, participate in the global digital economy. Supporting this goal are our education solutions across our markets which have reached 2.3 million learners through these and other education platforms.
In South Africa, Vodacom not only responded to the country’s power crisis with an increased investment in network resilience but has also recently concluded a landmark agreement with Eskom in the form of a ‘Virtual Wheeling Platform’ that aims to drive private sector investment into new energy generation. Given our commitment to making a positive impact on the country’s power grid and renewable energy mix, our agreement with Eskom serves as a blueprint for other corporates to adopt.
I’m particularly pleased with accelerated growth driven into our financial services portfolio by an ever-expanding mobile money ecosystem, Vodafone Egypt’s performance and the resilience of Vodacom South Africa, which substantiates our massive network investments so that we keep customers connected through extended periods of loadshedding. These elements contributed to the 35.5% increase in Group revenue to R72.8 billion, with Vodafone Egypt providing the biggest boost to growth given it did not form part of Vodacom Group’s first half performance in the past financial year. Revenue from new services such as financial and digital services, fixed and IoT contributed R11.7 billion, equivalent to 19.8% of Group service revenue, almost one-fifth of the Group’s total revenue and is well on track to reach our target contribution of 25-30% over the medium-term.
Our R4.5 billion investment over four and a half years to mitigate the impacts of loadshedding continues to show a return in South Africa, where we also committed, at the South Africa Investment Conference, to spend R60 billion in five years. These investments have already resulted in industry leading network availability during elevated levels of power outages and ultimately contributed to the 4.0% increase in service revenue in our largest market. Revenue growth in South Africa was supported by our consumer contract segment, excellent growth in fixed and financial services and a resilient performance in the prepaid segment, despite ongoing macroeconomic challenges associated with inflation and loadshedding. Supported by our investment into network resilience, data traffic growth accelerated to 45.2% in the period.Shameel Joosub, CEO, Vodacom Group
New services in South Africa such as financial and digital services, fixed and IoT were up 18.1% and contributed R5.1 billion to revenue. Revenue from financial services grew 10.8% to R1.6 billion due to a strong performance from our insurance business. Our super-app, VodaPay, continues to gain traction with more than 7.6 million downloads and 4.1 million registered users.
Vodafone Egypt, the largest acquisition in Vodacom Group’s history, delivered service revenue of R14.3 billion and contributed 24.1% of Group service revenue, despite challenging macroeconomics. The performance was supported by strong growth in data revenue, customer engagement and content integration. Vodafone Egypt ended the period with 47.0 million customers, up 5.5%, aided by its clear NPS leadership and strong data metrics. Financial services revenue doubled to R804 million or 5.6% of Vodafone Egypt’s service revenue. Pleasingly, Vodafone Egypt contributed to Group earnings per share in the period, despite a devaluation of the Egyptian pound since we announced the acquisition in November 2021.
Our International business segment, which comprises the DRC, Lesotho, Mozambique and Tanzania reported service revenue up 16.6% to R14.7 billion, with customers up 22.3%. Strong growth of data revenue and M-Pesa revenue, which were up 34.9% and 26.8% respectively, was offset somewhat by pressure associated with Mozambique’s price transformation programme. M-Pesa revenue growth was driven by continued customer and service adoption, consistent with our commitment to financial inclusion. The strong performance in data revenue was underpinned by increased smartphone adoption and accelerating our 4G network roll-out.
Safaricom delivered excellent results in Kenya, while our Ethiopian greenfield roll-out is progressing as expected. Service revenue in Kenya accelerated to 8.5%, supported by growth in the fixed business and an improved performance of M-Pesa revenue, which grew 16.5%. Further, Safaricom Kenya reported excellent EBITDA growth of 13.0%, supporting an upgrade to its guidance.
Our recently launched Ethiopian business, Safaricom Ethiopia, has made good progress since its commercial launch in October 2022, already reaching 4.1 million customers. More recently we launched M-Pesa, which will no doubt be a game-changer in boosting financial inclusion and economic growth in Africa’s second most populous country. At a Vodacom Group level, Safaricom contributed R1.5 billion to operating profit, declining marginally at 1.1%. This was an encouraging outcome, given that we expect Safaricom Ethiopia EBITDA losses to peak in the current financial year.
From a mergers and acquisitions perspective, the Competition Commission recently announced its recommendation to the Competition Tribunal to not recommend Vodacom’s proposed purchase of the 30% stake in MAZIV. We are hopeful that the next step in the process, namely the Competition Tribunal process, will yield a different result. I firmly believe that the transaction will foster economic development and help bridge South Africa’s digital divide in some of the most vulnerable parts of its society.
Vodacom has a proven track record as a resilient company and will continue to act swiftly so that we have the right measures in place. Looking ahead, the continued execution of our strategy has the potential to create immense economic value in the markets where we operate, helping to address inequality. By providing access to a smartphone, financial services, healthcare and education to every person across our markets we will fulfil our purpose.