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Vodacom Reports Revenues Boost in Fiscal H1 Results

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MIDRAND, South Africa -- Vodacom Group has reported its interim results for the six months ended 30 September 2018.

- Group service revenue up 6.1% (5.8%*) to R36.8 billion#; and Group revenue increased 5.6% (5.4%*) to R44.4 billion#.

- We added 4.8 million customers in the six months, up 10.7%, comprising 2.5 million in South Africa and 2.3 million in our International operations.

- Safaricom added 373 000 customers. In combination, we now serve over 109 million customers across the Group.

- South Africa service revenue increased 4.6% to R27.9 billion#, supported by strong customer growth. International operations service revenue growth accelerated to 12.8% (11.4%*), boosted by strong growth in data and M-Pesa.

- Group EBIT improved 3.4% (2.8%*) to R11.2 billion#, with strong improvement in our International operations.

- Significant capital investment of R5.3 billion to expand our coverage and improve the quality of our networks.

- Vodacom Lesotho, the first operator to launch a commercial 5G network in Africa.

- Concluded our new Broad-based black economic empowerment (BEE) ownership deal, the largest deal of its kind in the ICT sector.

- Safaricom contributed R1.4 billion# profit, after deducting the amortisation of fair valued assets and before minority interest.

- Interim dividend per share of 395 cents, improved, despite issue of 114.5 million new shares for new BEE structure.

Following the prospective adoption of IFRS 15: Revenue from Contracts with Customers on 1 April 2018, the Group's results for the six months ended 30 September 2018 are on an IFRS 15 basis, whereas the results for the six months ended 30 September 2017 are (as previously reported) on an IAS 18 basis. Comparisons between the two bases of reporting are not meaningful and to ensure appropriate disclosure during the period of transition onto IFRS 15, results for the six months ended 30 September 2018 has been disclosed on both an IFRS 15 and IAS 18 basis. Our commentary describing our operating performance in the Operating Review has been provided solely on an IAS 18 basis. The accounting standard applied is clearly marked in the heading of relevant columns in the news release. To aid in the understanding of the transition from IAS 18 to IFRS 15, we have provided commentary on the main differences between the two standards below. Further disclosure is also included in Note 2: Change in accounting policies and in Note 3: Segment analysis of the condensed consolidated interim financial statements for the six months ended 30 September 2018.

Shameel Joosub Vodacom Group CEO commented:

Following on from last year's extraordinary year for Vodacom, we delivered two strategic milestones during the first half of this year. In September, we concluded our second BEE transaction under the YeboYethu umbrella to replace the highly successful R7.5 billion deal launched in 2008.

Valued at R16.4 billion, the new scheme is the biggest ever in the Telecommunications industry in South Africa and makes YeboYethu our third largest shareholder. As expected, the costs associated with this transaction had a once-off impact on headline earnings per share. Excluding the charges relating to the BEE transaction and contribution from Safaricom, HEPS rose 6.0%~. To facilitate the new BEE structure, we issued an additional 114.5 million shares yet increased our interim dividend to 395cps.

Vodacom CEO Shameel Joosub.
Vodacom CEO Shameel Joosub.

In September, Vodacom Lesotho became the first company to commercially launch 5G on the African continent. This makes Vodacom Lesotho amongst the first in the world to lay claim to this innovation, paving the way for our other operations to follow suit once we secure the requisite spectrum.

Over 5 million customers joined the Vodacom and Safaricom networks, increasing the combined customer base to 109 million. This shows that our strategy of sustained and targeted investment in customer and network experience across our operations is delivering strong results, contributing to the 5.8%* growth in service revenue across the Group.

In South Africa, underlying growth has weakened as the country's economic slowdown increasingly weighs on consumer spending in the market. Still, service revenue rose 4.6% as anticipatory measures driven by the use of Big Data machine learning in more areas of the business has contributed to countering some of these pressures. The 2.5 million increase in customers in South Africa since March, shows that our sustained effort to deliver greater value is working across prepaid and contract and is evidence that our personalisation through Big Data is delivering results.

We invested R4 billion in South Africa alone in the past six months and at the same time we reduced effective voice and data prices by 8.5% and 16.4% respectively. We continue to accelerate our rural coverage expansion programme to bridge the digital divide and will prioritise an additional 200 villages this year to add to the 101 communities that we connected during the first quarter of this year.

Mozambique produced an excellent performance while the momentum from our commercial actions in Tanzania and DRC last year continues to gather pace. This contributed to the strong performance in our International portfolio where normalised service revenue grew 11.4%*, led by rising customer numbers, accelerating demand for data and improved growth in M-Pesa.

The contribution to the Group by our mobile money platform continues to improve. The combined customer base, including Safaricom, grew 13.7% to 34.2 million. In our International operations, we processed M-Pesa transactions worth USD14 billion, supporting a 25.2% increase in revenue to R1.4 billion. M-Pesa now supports 21 million Safaricom customers, an increase of 8.8%, and M-Pesa now constitutes nearly one-third of its service revenues.

Our strategic investment in Safaricom, concluded in the previous financial year, is exceeding our expectations having contributed R1.4 billion# to the Vodacom Group's operating profit. Safaricom reported a 7.7% increase in service revenue and an 18.7% rise in EBIT.

Looking ahead, the relative economic and currency stability in most of our International markets is pleasing and we will continue to invest heavily in our networks, artificial intelligence and Big Data analytics to drive financial inclusion, further enhance customer experience and progress Vodacom's digital telco strategy. I am pleased that Telkom has selected Vodacom as its new roaming partner, and we look forward to delivery on this long-term mutually beneficial agreement. Apart from the commercial benefit, this partnership will also result in cost savings for Vodacom. Efforts to reduce the cost to communicate are contingent on having access to the right spectrum at reasonable marketrelated prices. While we are encouraged by the significant progress in recent times regarding the licensing of 4G spectrum in South Africa, there are still a number of areas of concern with the current draft Electronic Communications Act as well as inconsistencies in the proposed policy and policy directions to ICASA on licensing unassigned high demand spectrum. We remain committed to engaging with relevant stakeholders to find a suitable outcome to move South Africa forward.


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