JSE-listed telecommunications giant Vodacom has reported earnings before interest, taxes, depreciation and amortisation (Ebitda) growth across the group of 13.2% year-on-year to R45-billion, at a slightly lower margin of 37.9%, in the year ended March 31.

The group’s earnings benefitted from higher service revenue of R93-billion, compared with service revenue of R79-billion posted in the prior financial year, and the acquisition of Vodafone Egypt, which was finalised in December last year.

Financial services revenue, in particular, increased by 29.2% year-on-year to R9.9-billion, contributing 10.5% to group service revenue.

Headline earnings per share (HEPS) came to R9.48 in the year under review, compared with HEPS of R10.12 in the prior year, while the operating profit of R29.2-billion in the reviewing period compares with an operating profit of R28.2-billion in the prior year.

In line with its new dividend policy, Vodacom declared a final dividend of R3.30, which contributes to the full-year dividend of R6.70 apiece.

Vodacom now serves a combined 185.8-million customers across the group.

Group CEO Shameel Joosub says the 2023 financial year was characterised by financial market uncertainty and a global economic slowdown; however, Vodacom – with its record of adapting quickly to new operating environments – managed to deliver a satisfactory set of results.

He explains that the start of the war in Ukraine in February 2022, coupled with lingering Covid-19 impacts, resulted in supply chain disruption and inflationary pressures. These factors contributed to a higher cost of living, a sharp rise in interest rates and exchange rate volatility across Vodacom’s markets throughout the 2023 financial year.

Vodacom responded by absorbing inflationary pressures where possible and sought to deliver even greater value to customers in an attempt to assist more vulnerable communities impacted by economic hardship.

Simultaneously, the group focused on diversifying and accelerating its growth profile by completing the acquisition of a 55% stake in Vodafone Egypt, for R43.6-billion, which marked the largest acquisition in Vodacom’s history. The acquisition will result in the group expanding its population reach to more than 500-million people across Africa.

Since consolidating Vodafone Egypt on December 8 last year, the company contributed R8-billion to group service revenue.

In South Africa, financial services continue to grow at an impressive rate, supported by Vodacom’s insurance portfolio and airtime advance product. In the new financial year, Vodacom will scale its lending, insurance and payment products further, while creating new business cases for remittances and wealth management.

The group’s international operations in the Democratic Republic of Congo, Lesotho, Mozambique and Tanzania produced good growth in the year under review, which was underpinned by a 31.1% increase in M-Pesa revenue and a 33.2% rise in data revenue.

Vodacom notes that, as expected, start-up costs with Safaricom Ethiopia have curbed Safaricom’s contribution to the group’s operating profit, having been 9.8% lower year-on-year; however, Safaricom Ethiopia was recently awarded a mobile financial services licence, which sets it in good steads for operations going forward.

Vodacom reports that financial services remain a key contributor to ‘new services’ in the group. This is evidenced by the 29.2% increase in group financial services revenue, which reached R9.9-billion in the year under review.

The group continues to scale its product suite for consumers and merchants. Notably, international merchant sign-ups increased three-fold in the review period.

Vodacom remains Africa’s largest mobile money platform by transaction value, with M-Pesa having processed $364-billion worth of payments in the year under review.

CAPITAL INVESTMENTS
Vodacom remains committed to spending about 13% of its overall revenue on capital expenditure (capex), particularly on technology and network infrastructure for an enhanced customer experience.

The group spent just under R38-million capex in the 2023 financial year.

Notably, Vodacom made a pledge at the South Africa Investment Conference to spend R60-billion in capital investment over the next five years, following the delivery of its commitment to spend R50-billion in capital investment since 2018.

The group explains that these investments contribute to better network resilience to keep customers connected throughout loadshedding, to more widespread fifth-generation coverage and to more rural coverage to help bridge the digital divide.

Since 2020, Vodacom has spent more than R4-billion on installing back-up power solutions such as batteries and generators, and a further R300-million in the past financial year on additional running costs in the form of diesel, security and maintenance.

These efforts have ensured network availability and contributed to an accelerated demand for data – which was up 45.4% in the fourth quarter of last year.

The group is confident that its ‘virtual wheeling’ pilot project with Eskom will be signed off in the near term and that this will have a positive impact on the country’s power grid, and ultimately the 20 000 towers across the industry that require reliable power supply.

Vodacom in September last year announced plans to launch a pilot programme in South Africa with Eskom to source all of the group's electricity from independent power producers, with Eskom providing transmission infrastructure and services.

At the time, the company said the pilot's success would provide Vodacom with renewable energy and serve as a blueprint for other South African corporates to replicate.

Vodacom called its situation unique, noting the complexities of having more than 15 000 distributed low-voltage sites across the country with linkages to 168 municipalities.  Vodacom has not yet been able to access power purchase agreements or transmit energy over Eskom’s network, which the pilot programme aims to change.

Moreover, Vodacom’s proposed purchase of a 30% joint venture (JV) stake in South African fibre company, Maziv, is expected to assist in narrowing the digital divide by enabling affordable access to connectivity in some of the most vulnerable parts of the country.

The companies plan on undertaking an ambitious fibre rollout programme, with the JV housing the material fibre network assets of Vodacom South Africa and Maziv’s Vumatel and Dark Fibre Africa assets.  

The deal remains subject to the approval of the Competition Commission.