Vodacom pumps R11.2 billion into its South African network
Vodacom has released its preliminary annual results for the financial year that ended on 31 March 2023, reporting modest revenue growth in South Africa and a decline in operating profit.
Across the group, Vodacom CEO Shameel Joosub said South Africa’s power crisis, higher interest charges, Ethiopia start-up losses, merger and acquisition costs, and higher inflation across its markets weighed on its net profit growth of 2.1%.
In South Africa, Vodacom said it invested R11.2 billion in its network in the past year, similar to last year.
It said this was to support network resilience, add network capacity, and enhance its IT platforms to maintain its competitive edge.
Vodacom said it had spent over R4 billion on backup power solutions such as batteries and generators since 2020.
In the past financial year, it spent a further R300 million on additional running costs in the form of diesel, security, and maintenance.
Vodacom’s South African service revenue grew 2.6% to R60 billion, supported by its network investments coupled with big data-led personalized offers.
“New services such as financial and digital services, fixed and IoT were up 9.7% and contributed R9.2 billion, or 15.3% of South Africa’s service revenue,” Vodacom said.
“In the fourth quarter, service revenue growth was 1.3%, supported by ongoing resilience in prepaid.”
Vodacom said the growth rate was lower than in the third quarter as mobile contract revenue declined due to a tough comparative period in Vodacom Business associated with some lower-margin project revenue in the prior year.
South African revenue reached R84.7 billion, up 4.8%, driven by strong equipment sales on 36-month contracts.
“Mobile contract customer revenue increased by 2.8% to R22.6 billion, supported by improved growth in our consumer segment,” said Vodacom.
“The consumer segment performance benefited from contract price increases of between 3% and 5% implemented in the first quarter of the financial year.”
Mobile contract average revenue per user was down 1.3% to R297, with the price increases offset by repricing pressure associated with the government contract for mobile services (RT15) within Vodacom Business.
“We added 193,000 contract customers in the financial year, reaching a base of 6.7 million, up 3.0%. Prepaid mobile customer revenue increased 3.1% to R25.9 billion and accelerated to 4.1% in the fourth quarter.”
Overall average revenue per user grew 3.6% to R58, with Vodacom crediting its “customer value management capabilities” (i.e. personalized offers) to drive increased customer engagement.
“Subscriber growth for the year was impacted by a clean-up of 1.5 million customers in the third quarter,” Vodacom said.
Data was a major driver for Vodacom in South Africa, with prepaid data revenue increasing by 12.9% to R11.4 billion for the year, with growth accelerating to 17.4% in the fourth quarter.
Data traffic increased 36.6% in the year and accelerated to 45.4% in the fourth quarter.
“We added 2.0 million data customers to reach 25.5 million, up 8.7%,” Vodacom stated.
“Smart devices were up by 11.1% to 29.3 million, while 4G and 5G devices increased by 18.6% to 21.2 million.”
The average usage per smart device increased by 29.1% to 3GB per month.
Prepaid data revenue increased by 12.9% to R11.4 billion for the year, with growth accelerating to 17.4% in the fourth quarter.
Fixed service revenue was up 7.2%, excluding wholesale transit.
“The result was supported by good customer adoption of fibre with homes and businesses connected reaching 164,3481, while our own fibre passed 165,000 homes and businesses,” Vodacom reported.
Service revenue generated from financial services was up 10.8% to R3.0 billion, with Vodacom crediting its insurance and Airtime Advance products for the increase.
“Insurance revenue increased by 13.3%, supported by growth in policies which were up 6.8% to 2.6 million,” said Vodacom.
“We advanced R12.8 billion in airtime during the year, representing 44.7% of total prepaid recharges.”
Vodacom Business service revenue declined by 1.7% to R17.4 billion, impacted by a decline in wholesale revenue.
“We lapped a strong prior year comparative as well as the repricing pressures associated with the RT15 government contract,” Vodacom explained.
“Operating profit declined 1.2% as a result of higher depreciation and amortization. In the second half, operating profit increased 2.5%, supported by the improvement of EBITDA [earnings before interest, tax, depreciation, and amortization].”
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