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Egypt, Ethiopia impact Vodacom earnings

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Pan-African Vodacom Group has reported strong revenue growth in the past financial year, but earnings were pulled down by startup costs associated with its new network in Ethiopia, higher finance and energy costs and inflationary pressure.

Group revenue was up 26.4%, to 151 billion South African rand (US$8.2 billion), for the year ended March 31, 2024, positively impacted by the acquisition of Vodafone Egypt in 2022 and strong results from Safaricom as well as what it called a "resilient performance" in its largest market, South Africa.

"A combination of startup losses in Ethiopia, higher finance and energy costs, the impact of absorbing inflationary pressures, and weaker exchange rates across markets, including the recent devaluation of the Egyptian pound, contributed to the 10.8% decline in headline earnings of 846 [South African] cents per share [46 US cents]," Vodacom Group CEO Shameel Joosub said of the results.

Vodacom now has over 203 million customers across the group, including Safaricom, up from around 115.5 million in March 2020. It also has 78.9 million financial services customers, including Safaricom, transacting US$1.1 billion per day.

Joosub said the group aims to grow to 230 million customers by 2027 and wants to hit 100 million financial services users in three years' time.

The CEO told Connecting Africa that the group expects this growth to come from ongoing momentum, capitalizing on its market leading position in most countries in its portfolio. He also expects a good growth trajectory in Ethiopia where the group is aiming to double its base every year for the next three years.

A growing African footprint

Vodacom has been expanding across Africa in recent years and now operates across eight markets covering a combined population of more than 500 million people.

Currently, the customer base is evenly split across four segments: South Africa, Egypt, Safaricom (Kenya and Ethiopia) and International business (Mozambique, Lesotho, the Democratic Republic of Congo (DRC) and Tanzania).

Its home market of SA is its biggest but around 75% of its customer base is now outside of South Africa.

At the end of March 2024, Vodacom had almost 51.7 million customers in South Africa; 48.3 million in Egypt; 44.7 million in Kenya; 21.3 million in DRC; 19.6 million in Tanzania; 11.7 million in Mozambique; 4.4 million in Ethiopia and 1.5 million in Lesotho.

The group owns a 35% stake in Safaricom – which has been a strong operator in Kenya for many years – and which expanded into Ethiopia in the latter part of 2022.

In December 2022, Vodacom also bought a 55% stake in Vodafone Egypt, for around $2.5 billion, and has been seeing good growth in the North African country since then.

"Despite inflationary pressures, Egypt posted net income growth of 53.7% in local currency, highlighting the assets growth trajectory and scope for strong rand returns over the medium term," the group said.

Even though Vodafone Egypt was consolidated into the group from December 2022, the group's "pro-forma results" have been presented as if the effective date of the Egypt acquisition was April 1, 2022, to show the segment's financial information on a full year basis.

For the financial year ended March 2024, group service revenue growth was 29.1%, and including Egypt on a pro-forma basis it was 9.2%. Group earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 24.3%, or 7.8% on a pro-forma basis.

"We expect that our efforts to diversify the Group's footprint and product mix will unlock strong returns over the medium term," said Joosub.

Egypt grew its customer base by 6.2% during the year and it now contributes one quarter of group revenue. It also grew data customers by 10.9% contributing to a 41.8% jump in data traffic and financial services revenue jumped 107.4% in local currency.

Vodafone Egypt now services 48.3 million customers, an increase of 6.2% year-over-year, and contributed one quarter of Vodacom Group revenue in the past financial year.   (Source: David Evers on Flickr CC 2.0).
Vodafone Egypt now services 48.3 million customers, an increase of 6.2% year-over-year, and contributed one quarter of Vodacom Group revenue in the past financial year.
(Source: David Evers on Flickr CC 2.0).

The CEO called Safaricom's performance "excellent" with revenue accelerating 13.4%, boosted by double-digit growth in mobile data and M-Pesa revenue. Safaricom's earnings in Kenya helped cushion costs incurred in the emerging Ethiopian business.

"M-Pesa transaction volumes increased 34.8%, showcasing the scale of the business. Despite start-up costs associated with operations in Ethiopia, Safaricom has confirmed that its rollout is on track in Africa's second most populous country," Joosub said.

Modest growth for SA

In its home market of South Africa, service revenue grew 2.6% to R61.6 billion ($3.35 billion), reflected ongoing macroeconomic challenges but was also boosted by growth in new services – which includes financial and digital services, fixed and Internet of Things (IoT) – as well as growth in the consumer contract segment and prepaid mobile data.

The group said SA's growth was partly offset by pressure in Vodacom Business – where service revenue contracted by 0.8% to R17.3 billion ($942 million) – as a shift away from 'Work From Home' policies saw corporate customers recalibrating their spend.

New services in South Africa were up 11.2% and contributed 16.6% of service revenue. This was due to good financial services revenue growth driven by the insurance business and payments.

Vodacom is still trying to acquire a joint venture stake in South African fiber operator MAZIV, but the deal was blocked by South Africa's Competition Commission in August 2023.

Vodacom will plead its case to the Competition Tribunal on May 20, 2024, and Joosub said he was confident that Vodacom has a good case and that the tribunal will see the logic of the transaction which he believes has strong public interest and pro-competitive advantages for the local fiber market.

Tanzania grows while Mozambique disappoints

The international business in DRC, Lesotho, Mozambique and Tanzania produced a combined 13.1% increase in service revenue, supported by foreign exchange tailwinds, a 21.4% increase in M-Pesa revenue, and a 30.5% rise in data revenue.

"Tanzania delivered strong double-digit growth, DRC's service revenue growth improved in the second half, while Mozambique's performance disappointed with a service revenue decline of 12.5%. We expect recent regulatory reforms in Mozambique will meaningfully improve our prospects in that market," Joosub explained.

Across the four markets, M-Pesa revenue grew 21.4%, contributing 26.5% of international business service revenue.

"This was boosted by a strong performance in Tanzania while new growth areas such as lending and savings products continue to gain traction across the portfolio as we facilitated loans worth R16.9 billion [$920 million], more than doubling year-on-year," the CEO added.


Follow Connecting Africa on our new X account @connect__africa to get the latest telecoms and tech news across Africa.


Despite a tough economic backdrop, Joosub said Vodacom remained committed to spending 13% to 14.5% of its overall revenue on capital expenditure.

The group also maintained its dividend policy of paying at least 75% of headline earnings, and the board declared a dividend of 590 SA cents per share (32 US cents per share) for the year.

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*Top image is of Vodacom Group CEO Shameel Joosub. (Source: Vodacom Group).

— Paula Gilbert, Editor, Connecting Africa

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