Vodacom service revenue jumps — but operating profit in South Africa slumps

Vodacom Group has reported a big surge in service revenue in its latest interim results, but its operating profit in South Africa has slumped.

In the six months from April to September 2023, the mobile network collected service revenue of R59.35 billion, up 42.2% from the R41.73 billion it made over the same period in 2022.

The massive increase is primarily due to R14.31 billion in additional revenue from its takeover of Vodafone Egypt and the rand depreciating 12% against Vodacom’s basket of international currencies.

When excluding amounts attributable to the new Egypt business, the group’s service revenue increased by 7.9% — from R41.73 billion to R45.04 billion.

In South Africa, where growth potential is lower than in many other African markets, Vodacom’s service revenue increased from around R29.49 billion to about R30.67 billion — a more modest 4%.

Vodacom labelled this performance as a “credible result”, given ongoing macroeconomic challenges.

Vodacom Group CEO Shameel Joosub said he was “particularly pleased” with accelerated growth in the company’s financial services portfolio with an ever-expanding mobile money ecosystem, Vodafone Egypt’s performance and the resilience of Vodacom South Africa.

Joosub said the latter substantiated Vodacom’s massive network investments to keep customers connected through extended periods of load-shedding.

Vodacom said its growth in South Africa was supported by new services and increased mobile data consumption.

“New services such as financial and digital services, fixed and IoT were up 18.1% and contributed R5.1 billion, or 16.6% of South Africa’s service revenue,” Vodacom said.

In addition, mobile contract customer revenue increased by 4.1% to R11.7 billion, supported by good growth in Vodacom’s consumer segment.

“The consumer segment performance benefited from a contract price increase, which was coupled with an additional data allocation of 20%,” Vodacom said.

Vodacom added 105,000 contract customers in the six months covering its interim result period, reaching a base of 6.8 million.

The company’s prepaid mobile customer revenue also increased 3.1% to R13.1 billion.

“We added 2.9 million prepaid customers in the six months to reach 40.5 million customers,” Vodacom said.

As a result of increased smartphone penetration and higher network availability, mobile data traffic on Vodacom’s network jumped 45.2% in the period.

Data-consuming customers increased 8.5% to 25.8 million, and smart devices were up by 10.3% to 30.5 million.

4G and 5G devices increased by 17.6% to 22.8 million, while the average data usage per smart device increased by 33.6% to 3.7GB per month.

Operating profit and EBITDA

Vodacom said although these results highlighted a strong operating performance, its earnings were influenced by higher interest rates, elevated inflation levels, and currency volatility across its markets.

In South Africa, Vodacom’s operating profit declined 3.3% to R9.6 billion due to depreciation and amortisation resulting from the company’s substantial investment in energy resilience and the licensing of new spectrum.

However, across the group, operating profit jumped from R13.27 billion to R17.01 billion — an increase of 28.2%.

The group’s earnings before interest, tax, depreciation, and amortisation (EBITDA) increased 35.1%, from R20.2 billion to R27.29 billion.

Earnings per share declined 5% — from 457 cents to 434 cents — compared to the same period in 2022, while headline earnings per share were down from 457 cents to 348 cents, a decline of 4.2%.

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