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Vodacom reports growth as South African operations shine

Vodacom CEO Shameel Joosub

Vodacom CEO Shameel Joosub

Photo by Duane Daws

14th November 2016

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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Telecommunications giant Vodacom on Monday reported maintaining headline earnings a share of 440c for the six months ended September 30, with net profit marginally down at R6.2-billion and operating profit up 5.4% to R10.7-billion.

Earnings a share for the first half of the year contracted 0.5% to 439c, with strong operational performance offset by the 14c a share impact from a one-off R257-million adjustment in tax in Tanzania, a weaker local market foreign currency resulting in a R326-million net remeasurement of a foreign currency-denominated intergroup loan in Mozambique and a R177-million loss from associates Helios Towers Tanzania.

The group’s earnings before interest, taxes, depreciation and amortisation grew 4.1% to R15.2-billion, while margins were flat at 38.1%.

“Our strategy of maintaining a network advantage and delivering value for money continues to reap rewards, despite a low-growth economic environment in South Africa and short-term impacts from customer registration requirements within our international operations,” said CEO Shameel Joosub.

Vodacom delivered service revenue growth of 5.3% to R33.9-billion, led by a 2.3-million increase in active customers, mainly in South Africa, since March, with the high demand for data services a key contributor to growth.

Group revenue edged up 4.1% to R40.1-billion during the six-month period under review, while group data revenue surged 18.7%, with 9.3-million customers now buying more than 223-million data bundles.

“South Africa has performed very well, despite the weaker [economic] environment,” Joosub told investors at the company’s results presentation at Vodacom’s headquarters.

The South African operations posted a service revenue increase of 5.6% to R25.4-billion, on the back of a strong growth of 1.5-million active customers to 35.7-million and increased data demand during the first half of the year.

Revenue grew 3.8% to R31.4-billion, while data revenue grew 19.5% to R9.8-billion, now comprising 38.8% of service revenue, from 34.3% a year ago.

“This has been supported by active data customers increasing 4.1% to 18.2-million and increased data traffic, which grew 38.4%,” Joosub said.

The company’s enterprise unit also reported strong revenue growth of 8.9% and now contributes 24.1% to the group’s service revenue.

“Our results were somewhat dampened by the international operations,” Joosub noted.

The international operations' service revenue grew 5.4% to R8.7-billion during the six months to September 30.

“As expected, our international operations have been impacted by customer registration requirements. Nonetheless, we witnessed encouraging net additions to our active customer base in the second quarter while M-Pesa revenue achieved stellar growth of 36.8% [and 10.9-million customers],” he said.

Active international customers during the half-year under review decreased 11% to 27.9-million, owing to disconnections during the second half of the prior financial year.

“However, the monthly customer acquisition trend has improved with net customer additions turning positive and recovering during the second
quarter, resulting in net additions of 791 000 customers in the six month period,” Joosub pointed out.

Mobile data revenue grew 15.5% to R2.1-billion on the back of a 14% increase in active data customers to 12-million and a 38.4% jump in data traffic.

Overall, Vodacom injected R5.7-billion – R4-billion of which was spent in South Africa – into its networks, with a focus on improving third- and fourth-generation coverage, during the six months to September 30, bringing investment over the past three years to R37-billion.

“We maintain our targets of low to mid single-digit group service revenue growth, mid to high single-digit group earnings before interest, taxes, depreciation and amortisation growth and group capital expenditure of 12% to 14% of group revenue in the medium term.”

An interim dividend of 395c a share was declared for the first half of the year.

LEGISLATIVE ENVIRONMENT
Meanwhile, Vodacom is reviewing the potential impact of the newly tabled National Integrated Information and Communication Technologies (ICT) Policy White Paper on its operations, with a dedicated team analysing its contents.

The White Paper, published in October, has been met with mixed reviews from industry; however, most proponents agreed that, while the controversial document had some good points, its concerning and red-flagged elements could be detrimental to the country’s ICT sector.

Vodacom supported the objectives the government aimed to achieve with the White Paper.

“However, we have a problem with the how,” said Joosub, noting it was unlikely the policy would achieve its targeted ambitions of accessible and affordable broadband in its current format.

“The White Paper proposes a telecommunications ecosystem that is untested and unproven anywhere in the world. It would be a significant departure from what is currently in place in South Africa and the polar opposite to what the regulator, the Independent Communications Authority of South Africa (Icasa), tabled in its invitation to apply for high-demand spectrum issued on July 15,” he told investors.

The interventions and certain elements outlined in the paper require more clarity and consultations, particularly as it would lead to the amendment of several Acts, including the Electronic Communications Act, the Broadcasting Act, the Icasa Act, the Electronic Communications and Transactions Act, besides others.

“For the White Paper to have legal effect, a number of new laws would need to be promulgated and/or existing laws amended. Consultation with all stakeholders would be required to give affect to these changes,” Joosub explained.

Vodacom is proposing a hybrid model and aims to engage government on a more sustainable model than that which is currently proposed, leveraging the current success of the competitive industry, while providing access to a proportion of the spectrum to smaller players and to the open-access wireless network proposed by the Department of Telecommunications and Postal Services.

Edited by Creamer Media Reporter

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