Despite higher interest rates, elevated levels of inflation and currency volatility impacting earnings, Vodacom Group on Monday posted strong financial results for the six months ended September 30, 2023.

The JSE-listed telecommunications company recorded group earnings before interest, taxes, depreciation and amortisation (Ebitda) growth of 35.1%, or 5.5% on a pro-forma basis, to R27.27-billion during the six months under review.

The group’s Ebitda margin declined slightly from 37.6% in the first six months of 2022 to 37.5% in the six months to September 30, 2023.

Headline earnings a share contracted 4.2% to 438c, mostly owing to startup losses in Ethiopia, higher interest rates and a prior year deferred tax asset recognised in Tanzania, offset by the contribution of Vodafone Egypt. Earnings a share fell 5% to 434c.

During the first half of the year, group revenue surged 35.5% to R72.8-billion, boosted by the acquisition of Vodafone Egypt.

“The encouraging revenue trend highlighted in the Vodacom Group’s performance in the first three months of the financial year continued into the second quarter, highlighting a strong operating performance,” said Vodacom Group CEO Shameel Joosub.

Vodacom Group’s service revenue increased 42.2% to R59.35-billion. Excluding Vodafone Egypt, service revenue increased 7.9% to R45.04-billion.

Financial services revenue increased 39.9% to R6.2-billion in the first-half under review, contributing 10.5% to group service revenue. The group’s 73.5-million financial services customers, including Safaricom on a 100% basis, are transacting $1-billion a day.

Revenue from new services such as financial and digital services, fixed and Internet of Things (IoT) contributed R11.7-billion, equivalent to 19.8% of group service revenue.

“I am particularly pleased with accelerated growth driven into our financial services portfolio by an ever-expanding mobile money ecosystem, Vodafone Egypt’s performance and the resilience of Vodacom South Africa, which substantiates our massive network investments so that we keep customers connected through extended periods of loadshedding,” he continued, further highlighting a 25.6% increase in overall capital expenditure to R9.54-billion during the first half of 2023.

“Our substantial investments underpin our market leadership and value strategy for the 10.4-million new customers joining our network over the last 12 months to reach a total base of 196.2-million customers across our markets. We expect our investments to continue to fuel our growth into an addressable market of more than 500-million people.”

In South Africa, to mitigate loadshedding, Vodacom increased investment in its network resilience and concluded a landmark Virtual Wheeling Platform agreement with State-owned power utility Eskom to drive private sector investment into new energy generation.

“Our R4.5-billion investment over four-and-a-half years to mitigate the impacts of loadshedding continues to show a return in South Africa, where we also committed, at the South Africa Investment Conference, to spend R60-billion in five years,” Joosub added.

As a result, improved network availability during elevated levels of power outages contributed to a 4% increase in service revenue in South Africa.

During the six months to September 30, new services in South Africa, such as financial and digital services, fixed and IoT increased 18.1% and contributed R5.1-billion to revenue. Revenue from financial services expanded 10.8% to R1.6-billion.

Vodafone Egypt, which increased its subscriber base by 5.5% to 47-million, achieved service revenue of R14.3-billion and contributed 24.1% of group service revenue, supported by strong growth in data revenue, customer engagement and content integration.

Further, financial services revenue doubled to R804-million, or 5.6%, of Vodafone Egypt’s service revenue.

Service revenue from the International business segment, which includes the Democratic Republic of Congo, Lesotho, Mozambique and Tanzania, increased 16.6% to R14.7-billion, with customers up 22.3%.

“Strong growth of data revenue and M-Pesa revenue, which were up 34.9% and 26.8% respectively, was offset somewhat by pressure associated with Mozambique’s price transformation programme,” Joosub commented.

Meanwhile, Safaricom delivered “excellent results” in Kenya, with Ebitda growth of 13% and service revenue accelerating by 8.5%, supported by growth in the fixed business and an improved performance of M-Pesa revenue, which grew 16.5%.

“Our recently launched Ethiopian business, Safaricom Ethiopia, has made good progress since its commercial launch in October 2022, already reaching 4.1-million customers.

“More recently we launched M-Pesa, which will no doubt be a game-changer in boosting financial inclusion and economic growth in Africa's second most populous country. At a Vodacom Group level, Safaricom contributed R1.5-billion to operating profit, declining marginally at 1.1%. This was an encouraging outcome, given that we expect Safaricom Ethiopia Ebitda losses to peak in the current financial year.”

Vodacom Group declared an interim dividend of 305c a share.