Vodacom's first quarter performance: Revenue growth outpaces share price drop

Vodacom Group’s share price slid by 5.46% even though first quarter service revenue growth of 13.8% tracked favourably against the group’s medium-term target of double-digit growth.

The share price traded at R135.86 on the JSE Wednesday afternoon, after the release of a trading update for the quarter to June 30 - the price was over 42.2% higher than at the same time last year.

“Encouraging trends from Vodacom Group's first quarter performance support the confidence we communicated in May this year, when we upgraded our financial targets, signaling that the organisation is poised for stronger growth in the medium term,” said Vodacom Group CEO Shameel Joosub.

Egypt remained a star performer, having grown service revenue 43.8% in local currency. In South Africa, which accounts for more than half the group service revenue, service revenue increased by 3%, which Vodacom’s directors described as “resilient.”

Joosub said there had been strong revenue and service revenue growth in rand terms, a healthier performance by the International business, good growth in the contract segment and beyond mobile services in South Africa, and another all-round excellent performance by Egypt.

Overall, group revenue grew 10.6% to R40bn, with South Africa making up R22.52bn of that. International business service revenue increased 9.7%, with normalised growth accelerating to 12.4%. Group financial services revenue increased 18.1% to R3.9bn

.Joosub said that their strategy to diversify revenue growth by product and geography continues to pay dividends, evidenced by the 10.6% growth in revenue. Group service revenue increased 11.4% to R32.3bn in the first quarter - group financial services revenue growth came to 18.1%.

Tanzania, DRC and Lesotho were the significant contributors to the 12.4% growth in the International business. Service revenue from beyond mobile services was a key growth driver and contributed R6.9bn in the quarter, which equates to 21.4% of the group and “is well on track to reach our target contribution of 30% by 2030.”

Financial services remained a priority and is the largest component of beyond mobile services.

“Including Safaricom, we now process $460bn in mobile wallet transaction value annually, which underscores the impact and scale of this business. This is a 14.9% increase in transaction value over the past 12 months and showcases our clear fintech leadership position in Africa,” said Joosub.

The growth of the financial services was pleasing as it sought to deepen financial inclusion through an increasing portfolio of services that already includes insurance, loans, savings, international money transfer and merchant services.

Group financial services revenue of R3.9bn was supported by strong growth from the insurance business in South Africa, strong growth in Egypt of 44.3% and a 17.4% increase from International business on the back of an improved performance in Mozambique.

South Africa's results were supported by strong performance in the contract segment and good growth in financial services, fibre and cloud services, offsetting a marginal decline in the prepaid segment. After investing R1.6bn in the quarter, the group expected to invest around R12bn of capital expenditure in the current financial year.

“Looking ahead, we're focused on delivering on our Vision 2030 targets, which include growing our customer base to 260 million and our financial services customer base to 120 million,” Joosub said.

“Core to this strategy will be accelerating mobile and fixed connectivity, scaling handset financing and the roll-out of innovative digital and financial services in all our markets. We will also seek to expand our partnerships across Africa.”

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