- Vodacom Group reported higher revenues, but profits are 9% lower than in 2021.
- The company points to a host of challenges it faces in the markets it operates in that have contributed to lower earnings.
- Vodacom continues to invest in its network with R5.8 billion spent on infrastructure over the past six months.
One of South Africa’s largest mobile network operators, Vodacomtoday published its interim results for the last six months.
While revenues are up 7.7% (5% when normalized and international exchange rates are taken into account), the group detailed a number of difficulties it has faced over the past half year.
While revenues stood at R53 billion, the company only recorded a net profit of R8 billion, down 9% from the same period in 2021.
Among the pressures it faces, Vodacom says inflationary pressures caused by the COVID-19 pandemic as well as the Russian-Ukrainian war have raised the cost of living. This means shoppers are more cautious about how they spend their money and are likely to opt for low-cost communication solutions over video calling and reckless data usage.
The mobile network operator says it has tried to absorb those costs and sought to accelerate initiatives that deliver greater value to strained customers.
However, the company is also facing start-up costs in Ethiopia where Vodacom has a minority stake in Safaricom Ethiopia. These costs contributed to a 9.3% decline in earnings per share.
“It is encouraging that the recent announcement that Safaricom Ethiopia will be awarded a financial services license should accelerate our ambition to transform lives in Africa’s second most populous country. We have already launched our network in 16 cities in Ethiopia with plans to expand services to 25 cities by April 2023, to reach our first milestone of 25% population coverage,” explained Shameel Joosub, CEO of Vodacom Group.
The other reason given by Vodacom for the fall in its profits this semester is the continued investment in its network. During this last six-month period, Vodacom has invested R5.8 billion in its network. Much of this – R2 billion – was used for batteries to keep Vodacom’s infrastructure operational during the load shedding.
In rather good news, Vodacom’s super app, VodaPay, has been downloaded some 3.5 million times and has reached 2.2 million users. The Vodacom Group CEO adds that in the short term, the company plans to add cash-in and cash-out capabilities and expand its micro-loan business.
“Looking forward, we expect the acquisition of Vodafone Egypt and the joint venture Community Investment Ventures Holdings (Proprietary) Limited (CIVH) to strengthen our benefits system and provide the opportunity to accelerate the group’s growth profile. Vodacom In Egypt, the transaction has received the approval of the National Telecommunications Regulatory Authority and remains subject to the approval of the Financial Regulatory Authority and other key conditions precedent, as indicated in the circular to the shareholders released by the Company on December 10, 2021,” Joosub added.
As Vodacom stresses to investors its commitment to creating value, the fact that earnings per share is down nearly 10% is likely to raise concerns.
Let’s see what Vodacom can do in the next six months.