Vodacom spends R11bn on network resilience in SA

Vodacom, South Africa’s biggest mobile operator, is investing over R11 billion per year in its network, which has been stressed by the country’s incessant power cuts.

So says Shameel Joosub, Vodacom Group CEO, as the company today announced its trading update for the quarter ended 30 June.

During the period, Vodacom says group revenue increased 36.9% to R35.7 billion, positively impacted by the acquisition of Vodafone Egypt and rand depreciation against the firm’s basket of international currencies.

Group service revenue was up 43.8%, or 9.8% excluding Vodafone Egypt.

According to the telco, South African service revenue grew 3.9%, underpinned by the contract segment, fixed and financial services.

It adds that international service revenue increased 23.8%, driven by data revenue growth and a weaker rand.

Vodafone Egypt grew service revenue 27.6% in local currency, as financial services revenue more than doubled.

It notes that financial services revenue increased 46.2% to R3 billion, with $1 billion per day transacted on mobile money platforms.

Commenting on the results, Joosub says a number of encouraging trends were evident in Vodacom Group’s first quarter performance, despite the ongoing uncertainty impacting global markets and economies.

“These include strong service revenue growth in local currency by Vodafone Egypt, Vodacom South Africa’s encouraging data and fixed performance, strong financial services growth and the expansion of M-Pesa’s ecosystem into new service offerings, including merchants.”

Joosub notes Vodacom has responded to SA’s power crisis with increased investment in power resilience and meaningful engagement with stakeholders.

“We welcome the government’s block exemptions for energy users and suppliers, which enables more efficient procurement and use of backup energy solutions. We were also encouraged by Eskom’s recent publication of a ‘Virtual Wheeling Platform’ paper that builds on our pioneering project with the energy utility to drive private sector investment into new energy generation.

“We are confident that our virtual wheeling agreement 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 renewable energy mix.

“In SA, our R4 billion investment over four years to mitigate the impacts of load-shedding continues to pay dividends. We now invest more than R11 billion a year in our South African infrastructure alone, which has resulted in industry-leading network availability during elevated levels of power outages and ultimately contributed to the 3.9% increase in service revenue in our largest market.”

He adds that revenue from new services – financial and digital services, fixed and internet of things – accounts for almost one-fifth of the group’s total revenue and is well on track to reach the target contribution of 25% to 30% over the medium-term.

“Financial services remains a clear strategic priority for the group and produced a 46.2% increase in revenue to surpass the R3 billion mark in a quarter for the first time. This was supported by a strong performance in South Africa and M-Pesa, which remains Africa’s largest mobile money platform by transaction value, and its new services in particular, such as loans and merchant services.

“Combined with financial services in Vodafone Egypt and Safaricom, our mobile money platforms processed $360.6 billion over the last 12 months, up 5.8%.”

Joosub points out that in SA, growth was underpinned by the insurance business, with policies up 10.2%.

“Our super app, VodaPay, reached 6.7 million downloads and launched free deposits and added ‘send money’ and cash-out services in the quarter.

“Supported by our continued focus on financial inclusion and accelerated capital expenditure, revenue in our international operations grew 23.2% to R7.4 billion, underpinned by currency gains and strong growth in M-Pesa and data revenue. A key focus for our international portfolio is digital inclusion through smartphone adoption and data usage, supported by our 23 million data customers.”

Smartphone penetration across the firm’s international operations reached 33.2% in the quarter, highlighting the opportunity for innovative handset financing options to accelerate adoption, he notes.

“From a mergers and acquisitions perspective, we await regulatory approval for our proposed acquisition of a joint venture stake of up to 40% in Maziv, which will accelerate fibre reach in South Africa, fostering economic development and helping bridge SA’s digital divide.”

The CEO adds that the Ethiopian business, Safaricom Ethiopia, has made good progress since its commercial launch in October 2022, already reaching 2.7 million customers, and is set to launch M-Pesa services in the second quarter.

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

“Longer term, we will relentlessly pursue our purpose of connecting people for a better future. I firmly believe that the continued execution of our strategy has the potential to create immense economic value in the markets where we operate, helping to address inequality. By providing access to a smartphone, financial services, healthcare and education to every person across our markets, we will fulfil our purpose.”