Mobile phone operator Vodacom on Monday reported a 7.4% rise in operating profit to R24.5 billion for the year to end-March 2019, excluding a one-off item, and said it now expect a mid-high single digit growth rate in operating profit on average for the next three years.
The Vodafone-owned mobile phone operator unlocked R7.5 billion in value for YeboYethu empowerment shareholders, and in September 2018 concluded a R16.4 billion broad-based black economic empowerment (BBBEE) transaction.
The costs associated with concluding the new BBBEE ownership deal is evident in the subdued increase in Vodacom’s operating profit.
Excluding one off BBBEE costs, Vodacom’s headline earnings per share [South Africa’s main profit gauge] rose by 4.2%.
Shameel Jossub, Vodacom Group CEO, said the company continues to make good progress on its key strategic pillars.
“We expect the solid momentum from our digital services platforms to continue. Further, the strategic partnerships being formed by our Enterprise business will strengthen our IoT offers and Enterprise propositions, ultimately to the benefit of consumers,” said Joosub.
“We are in the process of concluding the acquisition of the M-Pesa brand and platform related assets from Vodafone through a joint agreement with Safaricom, we expect this will further accelerate our mobile money growth plans in Africa. The commercialisation of our recently launched payment gateway and digital wallet will assist in sustaining Financial Services growth in South Africa.”
Joosub said the company has updated its medium-term targets to reflect these opportunities and the benefits of Safaricom acquisition, and “now expect a mid-high single digit growth rate in operating profit on average for the next three years”.
Furthermore, Vodacom increased customers by 5.8% [6 million customers] to 110 million subscribers and revenue rose 4.3% to R90.1 billion in the year to end-March 2019.
Safaricom contributed R2.8 billion to Vodacom Group’s operating profit, with Safaricom reporting a 7.0% increase in service revenue and a 13.1% improvement in EBIT, underpinned by strong customer growth and M-Pesa revenues. For more read:
“The Safaricom acquisition has proven to be a catalyst for extending our mobile money leadership position on the African continent and in ensuring that Financial Services have become a significant contributor to the group’s revenues,” Vodacom said on Monday.
“In the past year, we effected 11 billion transactions worth R2 trillion to 36.1 million customers across our Financial Services network, including Safaricom.”
The company is also gearing for more growth.
During the year, Vodacom was awarded a 4G licence in the DRC, in Mozambique it unified and renewed its licences for 20 years and acquired 2x10MHz of 800MHz and in Tanzania acquired an additional 2x10MHz of 700MHz 4G spectrum which will enable it to progress further in delivering on its strategic data ambitions.
The company said the total costs of these spectrum acquisitions were $65 million across its operations.
“We invested R3.4 billion in rolling out 4G services, improving capacity and widening our network reach and quality. We added 984 4G sites and 371 3G sites and lead in network NPS in most of our operations,” said Vodacom.