Vodacom well on its way to reach 2030 growth target of 260 million customers

Vodacom’s 32% interim headline earnings growth reported Monday was at the lower end of guidance it revised days ago following the one-off payment to Kenneth Makate to settle the Please Call Me matter.

Despite the settlement payment of an undisclosed amount, but now widely speculated to be close to R500 million, Vodacom still delivered “robust growth” - service revenue increased 13.6% for the six months to September 30 to R65.8 billion, which is above their five-year target of double-digit growth. Earnings before interest tax depreciation and amortisation in the South Africa business however fell by 5.3% to R8.76bn, due to the revenue performance and the one-off payment.

The settlement agreement reached last week arose after former employee Makate and Vodacom had been involved in legal action over the Please Call Me idea for 18 years, with Makate initially claiming R10bn for inventing the Please Call Me service, while Vodacom had put the figure closer to R50 million.

The interim dividend increased by 15.8% to 330 cents per share. The group served 223.2 million customers, a figure 8.6% higher on the same period a year before, and it includes 93.7 million financial services customers.

Group revenue was up 10.9% to R81.6bn. Earnings before interest, tax, depreciation and amortisation increased 14.7% to R30.5bn. Regional highlights included Egypt’s 42.3% local currency service revenue growth, a stable performance in South Africa and a strong recovery from the International business.

CEO Shameel Joosub said an encouraging revenue trend in the first three months continued in the second quarter.

Beyond mobile – including financial and digital services, fixed and IoT - contributed 21.8% of group service revenue, moving the group closer to its Vision 2030 target of exceeding 30%.

In South Africa, service revenue increased 2.2% to R31.7bn, underpinned by the contract segment, beyond mobile services and R54.1bn investment in network resilience over five years.

This investment, in addition to increased smartphone penetration and new prepaid LTE offerings, contributed to a data traffic increase of 31.1% during the six months.

The acquisition of a 30% stake in Maziv was in the final approval phase. Separately, the Please Call Me matter was settled by the parties out of court.

The International business – comprising DRC, Lesotho, Mozambique and Tanzania – reported 13.3% service revenue growth to R16.7bn, with customer numbers increasing by 13.6% to63.7 million.

Double-digit growth in DRC, Lesotho and Tanzania was supported by strong momentum in M-Pesa and data services and improved commercial traction in Mozambique. All four markets produced accelerated growth rates in the second quarter.

Safaricom report another strong performance in Kenya and was continuing to scale in Ethiopia. Safaricom service revenue increased 11.1%.

In Kenya, M-Pesa revenue grew 14% on the back of heightened platform engagement and a 13.3% increase in customers.

Over the past twelve months, the volume of M-Pesa transactions in Kenya has risen 22% to 39.8 billion. In Ethiopia, losses at our greenfield operation continue to moderate while the business scales with customer numbers reaching 11.1 million, up 83.7%. Safaricom reported net income growth of 52.1%.

M-Pesa continues to be Africa’s largest mobile money platform, processing over $476.8bn in transaction value over the year, including Safaricom.

Egypt service revenue of R17.6bn now contributes 26.8% to the group total. This was supported by a strong summer campaign, a 5.9% increase in Egypt’s customer base to 51.1 million, data traffic growth of 21.9% and the rapid adoption of Vodafone Cash.

“In June, we launched 5G services in Egypt, leveraging existing investment into 5G ready sites. As we roll out this technology, we expect this will help sustain Egypt’s growth in the foreseeable future,” said Joosub.

In South Africa, service revenue increased 2.2% to R31.7bn, underpinned by the contract segment, beyond mobile services and R54.1bn investment in network resilience over five years.

This investment, in addition to increased smartphone penetration and new prepaid LTE offerings, contributed to a data traffic increase of 31.1% during the six months.

The group ambition is to grow its customer base to over 260 million, and financial services to 120 million customers by the 2030 financial year, while delivering double-digit EBITDA growth.

“The fact that we’ve expanded our customer base to 223.2 million and now serve 93.7 million financial services customers shows we are well on track to deliver on targets that reflect our relentless focus on digital and financial inclusion,” said Joosub.

Investments into technology and networks amounted to R9.4 billion in the past six months, with a plan to spend R23 billion across our markets in the current financial year. Including Safaricom, we have added 1 881 4G and 3 524 5G sites year-to-date.

He said a good example of their recent initiatives to drive inclusion were scaling programmes to upskill the next generation for careers in science and technology, and partnering across our markets to expand rural and fibre network coverage.

An example was the infrastructure sharing partnership signed with Airtel Africa in August in markets including Mozambique, Tanzania and the Democratic Republic of Congo (DRC). Further, an agreement was reached with Orange earlier in the year to form a first-of-its-kind rural towerco partnership, that will see the partners collaborating to build, own, and operate solar-powered mobile base stations in underserved areas of DRC.

“This will not only enhance customer experience but also assist with providing access to digital services for a broader population, particularly those in underserved areas,” he said.

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