Vodacom CEO points to ‘resilient’ financial performance – flags rising pressure on consumers

Vodacom Group said Thursday (21 July) in a trading update for the quarter ended June 2022, that service revenue for its South African business climbed 3% in an environment beset by turmoil in financial markets and uncertainty about the recovery of the global economy caused primarily by the Russia-Ukraine conflict.

Inflation, it said, continues to accelerate in most of the markets where it is present, meaning that the cost of living has climbed, putting further pressure on consumers.

Service revenue growth in South Africa was aided by a 5.1% growth in the operator’s customer contract base to 6.5 million.

“During the past quarter, we made good progress on the optimisation of our assets, which in the medium term will also positively contribute to bridging the digital divide,” said Vodacom Group chief executive officer, Shameel Joosub.

“For instance, we are in the process of establishing a separate legal entity for our South African ‘TowerCo’ that will be 100% owned by Vodacom Group and intend to announce the managing director of the business in due course.”

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New services such as financial and digital services, fixed and IoT were up 9.2% and contributed R2.1 billion, or 14.7% of South Africa’s service revenue. Revenue of R20.3 billion increased by 3.8%, supported by sustained growth in equipment revenue.

Mobile contract customer revenue increased 5.8% to R5.5 billion, supported by both consumer and Vodacom Business segments.

“In the quarter, we increased contract pricing by between 3% – 5% reflecting inflationary cost pressures. Mobile contract ARPU of R294 was up 0.7% with the price increases partially offset by repricing pressure associated with the government contract for mobile services (RT15) within Vodacom Business,” said Joosub.

ARPU of R55 in the prepaid segment was up 1.9% quarter-on-quarter.

Vodacom said it added 52,000 contract customers, with the base at 6.5 million, up 5.1%.

Data traffic growth accelerated to 30.2% in the quarter. Data customers of 23 million were up 8.6%, representing 63.5% penetration of our one-month customer base, the operator said.

“Smart devices on our network were up by 11.5% to 26.4 million. The number of 4G devices on our network increased 11.3% to 18.2 million while the average usage per smart device increased 25.2% to 2.7GB per month,” said Joosub. Prepaid data revenue of R2.6 billion was up 8.3%.

Service revenue from financial services was up 4.5% to R672 million, with a customer base of 13.1 million.

Vodacom Business service revenue increased by 2.5% to R4.3 billion, supported by the sustained demand for mobile connectivity and IoT revenue. IoT connections were up 19.1% to 6.7 million, with revenue growth at 16.4% to R0.4 billion.

Group revenue in the first quarter was up 5.2% to R26.1 billion underpinned by a resilient financial performance in most markets and South Africa in particular, said the chief executive. “Our service revenue growth was supported by a 10.4% increase from our International portfolio and 9.3% growth from our financial services business.”

Joosub said that financial services remain a clear strategic priority for the group and this business continues to gain momentum, contributing R2.1 billion to service revenue. “The segment is driven in the main by our pioneering mobile money platform M-Pesa, which is Africa’s largest by transaction value.”

“Combined with Safaricom, our M-Pesa platform processed $340 billion over the last twelve months, up 20.2%. Looking ahead, a further meaningful 43% reduction to mobile money levies in Tanzania from July 2022 bodes well for M-Pesa’s contribution to financial inclusion in the country.”

The chief executive also pointed to a rapid adoption rate of the VodaPay super-app in South Africa – with 2.8 million downloads and 1.9 million registered users by quarter end.

Joosub also emphasised the group’s ambitions of halving its environmental impact by 2025. “Vodacom South Africa will increasingly diversify its energy mix and purchase the electricity it needs to operate from renewable energy sources wherever possible,” he said.

“Looking ahead, we are fully cognisant of the financial constraints on customers caused by global economic uncertainty and increased inflation and remain committed to delivering innovations that enhance the value we deliver to customers and helping to alleviate cost of living pressures,” said Joosub.

Read: Good news for Vodacom customers in KwaZulu-Natal

Artmotion S.Africa

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