Telecommunications group Vodacom on Monday posted a decline in headline earnings per share (HEPS) during the first six months of the year, impacted by startup losses in Ethiopia and higher finance costs as interest rates normalised to pre-Covid-19 levels.

The group reported a 9.5% and 9.3% decline in HEPS and earnings per share respectively to 457c a share during the six months to September 30, compared with the 505c and 504c apiece reported in the corresponding six months last year.

Earnings before interest, taxes, depreciation and amortisation were muted with a growth 0.6% to R20.2-billion, impacted by one-off factors and higher energy and network costs for the six months to September 30.

“Vodacom has attempted to absorb considerable inflationary costs from the dramatic increase in energy costs as far as possible and has sought to accelerate various initiatives to deliver even greater value to financially strained customers,” says Vodacom Group CEO Shameel Joosub.

“These efforts, coupled with expected startup costs associated with the recent launch in Ethiopia of a national telecommunications network through Safaricom Ethiopia, in which Vodacom holds a minority and which is accounted for as an associate, contributed to the 9.3% decline in earnings per share.”

The group has launched its Ethiopian network across 16 cities, with plans to expand services to 25 cities by April 2023 to reach its first milestone of 25% population coverage.

Further, Safaricom Ethiopia is also set to be awarded a financial services licence.

“Despite ongoing financial market volatility and weaker prospects for the global economy, Vodacom Group’s resilient revenue performance in the first quarter continued into the second quarter, evidenced by the 7.7% increase in group revenue to R53.7-billion in the first half of the current financial year,” Joosub continues.

This was supported by normalised growth of 5% and rand depreciation against Vodacom’s basket of International currencies.

Group service revenue increased 7.2% to R41.73-billion in the six months under review, with normalised growth accelerating to 4.9% in the second quarter.

“Substantial investment into technology and our networks continues to resonate with customers, having attracted an additional three-million customers in the period. This means we now serve 132.6-million customers across our footprint, where we now have an addressable market of more than 400-million people, with Vodafone Egypt set to add further scale,” he adds.

Vodacom’s financial services customers increased 10.2% to 63.1-million, including Safaricom on a 100% basis, with the division reporting an overall processed transaction value of $355.2-billion over the last twelve months - an increase of 17.6%.

“Accelerated growth of 39.3% in the second quarter saw our M-Pesa revenue end the six-month period 25.1% higher at R3-billion, accounting for nearly a quarter of International service revenues. In addition to M-Pesa’s recovery, strong data growth and foreign exchange tailwinds largely contributed to the 17.9% growth in service revenue from our International operations to R12.6-billion,” Joosub points out.

Meanwhile, Vodacom invested R5.8-billion into its network in South Africa – the most in a six-month period – to further enhance the customer experience at a time when the country experienced record levels of power outages.

Over the past two years, Vodacom has invested over R2-billion in batteries alone to enhance the resilience of its network to keep customers connected during extended periods of loadshedding.

“At the same time, we continue to work closely with [State-owned power utility] Eskom to find a renewable energy solution for the benefit of our planet and customers, having announced in September 2022 an in-principle agreement with South Africa’s energy utility to pilot a programme that would see Vodacom South Africa source its electricity from renewable independent power producers and contribute this into the national grid.”

Looking ahead, Vodacom expects its Vodafone Egypt acquisition and Community Investment Ventures Holdings (CIVH) joint venture will enhance its system of advantage and provide scope to accelerate the growth profile of the Vodacom Group.

In Egypt, the transaction obtained approval from the National Telecom Regulatory Authority and remains subject to the Financial Regulatory Authority’s approval and other key suspensive conditions.

The company’s acquisition of a stake of up to 40% in CIVH recently received approval from the Independent Communications Authority of South Africa, subject to licence conditions such as open-access and remains subject to Competition Commission approval.