Vodacom’s earnings fall, growth to slow

Shares of mobile phone operator Vodacom fell nearly 6 percent earlier yesterday after it posted a surprise decline in first-half earnings and warned earnings growth would be slow over the next three years.

At close, however, the shares had picked up somewhat, losing 4.21 percent to R127.50.

South African telecom companies are battling to return the kind of double-digit margins posted over the last decade as competing firms cut voice and data costs to gain market share.

Vodacom, the country’s operator with the most users, lowered its medium-term outlook for earnings before interest, tax, depreciation and amortisation to mid-single digits from previous expansion forecasts of mid to high-single digits.

Rival Telkom has warned its earnings for the first six months could fall by up to 70 percent.

“It’s not a Vodacom specific story. The industry as a whole is actually going into a low returns environment,” said Farai Mapfinya, head of equities and portfolio manager at JM Busha Asset Managers.

The local unit of Vodafone said its service revenue – which excludes income from non-core business such as mobile phone sales – took a R1 billion hit after the sector’s regulator halved termination rates, the amount operators charge one another to connect calls, this year.

Vodacom said diluted headline earnings a share fell 5 percent to R4.15 a share in the six months to September.

The operator that offers services across five African countries including Tanzania, the Democratic Republic of Congo and Mozambique said revenue from those countries grew 13 percent. Vodacom is the dominant operator in South Africa although dwarfed by rival MTN across the continent. – Reuters

• Vodacom falls as much as 6%

• Vodacom cuts profit forecast