Vodacom CEO Shameel Joosub
Despite a 1.2% cut in yearly dividend, and seeing a slight decline in customers to 61.3-million owing to international customer registration requirements, JSE-listed telecommunications group Vodacom continued with its growth trajectory off the back of a difficult 2015 financial year, seeing a rise in revenue and earnings in the year ended March 31, 2016.
During the group’s results presentation on Monday, Vodacom CEO Shameel Joosub noted that the demand for data remained the company’s key driver, also attributing the group’s 7.5% rise in overall revenue to its R8.7-billion investment in network infrastructure over the past two years.
This also enabled Vodacom to increase its LTE/4G coverage by 23 percentage points from 35% in the previous financial year to 58% in the year under review. “Affordability of devices and data bundles led to a 46.8% increase in data traffic as data bundle sales jumped 85.9%,” said Joosub.
Group data revenue, supported by the group’s network investment, was up 28.5%, while group earnings before interest, taxes, depreciation and amortisation (Ebitda), was up 12.8% to R30.35-billion, expanding the Ebitda margin year-on-year by 1.8 percentage points to 37.9%.
Group capital expenditure (capex) dropped 3.2% year-on-year, from R13.31-billion in the 2014/15 financial year, to R12.88-billion in the year under review, which Vodacom spent on rapidly expanding LTE/4G coverage and increasing data speeds.
Headline earnings a share, while up 2.7% to R8.83 a share, were nevertheless negatively impacted by the remeasurement of foreign currency-denominated intergroup loans and one-off black economic-empowerment charges.
Vodacom declared a final dividend of R4 a share, taking the total dividend for the year to R7.95 a share, down 1.2% from the R8.05 a share declared in the previous financial year.
LOCAL
In South Africa, Vodacom’s service revenue increased 4.9% to R49.23-billion, as the business returned to growth following the 50% cut in mobile termination rates last year.
“The successful execution of our strategy resulted in average revenue per user (Arpu) trend improvement, boosted by impressive data growth as a result of our accelerated investor programme,” said Joosub.
Vodacom South Africa’s Ebitda also increased 9.5% to R25.01-billion, with strong revenue growth, recording an Ebitda expansion of 1.6 percentage points to 38.7%.
Local revenue ticked up 5.2% to R62.28-billion, underpinned by a 6.2% increase in equipment revenue, with 10.5-million devices sold in the year under review, 61.6% of which were smart devices.
Data revenue increased by 27.7% to R17.29-billion, as strong growth in data demand continued. Vodacom attributed its 46.8% growth in data traffic to improved access to affordable devices and a 22.8% increase in active smart devices. This was driven by the sale of low-cost Vodacom-branded devices, which accounted for 25.7% of total device sales.
Vodacom added that its local capex of R8.6-billion enabled the company to substantially widen the company’s 3G and LTE/4G coverage, as well as improve voice quality and increase data speeds.
“We have more than doubled the number of LTE/4G sites in the year to cover over 6 000 sites,” said Joosub, adding that 3G coverage increased to 99% of the population.
INTERNATIONAL
Internationally, Ebitda grew by 31.2% to R5.38-billion, contributing 17.7% to group Ebitda. With an Ebitda margin improvement across all regions, international Ebitda increased from 26.1% to 29.3%, positively impacted by stronger service revenue and cost efficiency initiatives of R705-million, partly offset by currency devaluation in Tanzania and Mozambique.
International revenue, representing 33.9% of group revenue, grew by 16.6%, while international service revenue increased by 16.2%, adding to growth across all markets. Data revenue increased by 31.9%, driven by continued network investment.
Vodacom’s international capex during the year under review was R4.1-billion, 22.3% of revenue.
OUTLOOK
Vodacom remained confident in its growth strategy going forward, revising its medium-term targets upwards. This included single-digit group service revenue growth, single-digit group Ebitda growth and capex of 12% to 14% of the group’s revenue over the next three years.
“Our markets are expected to remain highly competitive and regulatory and macroeconomic risks persist,” said Joosub, adding that the challenges in South Africa's macro environment would continue to keep customer spend under pressure.
“Although not immune to these risks, we believe that, through the execution of our strategies, we will continue to show resilience in all our operations,” he concluded.