2 reasons Vodacom’s earnings dropped in South Africa

Vodacom’s results for the six months ended 30 September 2017 show that its earnings before interest and tax (EBIT) margin in South Africa has declined.

According to Vodacom, the company’s EBIT margin contracted by 2.9% to 29.2%.

The EBIT margin contraction was influenced by two main factors:

  • Higher contribution from low-margin equipment sales.
  • The cost of its new roaming agreement with WBS (Rain).

The 2.9% decline in EBIT margin has seen the company’s EBIT in the country decline from R10.101 billion to R9.882 billion for the period.

This decline, however, does not mean the company is not performing well.

Vodacom South Africa’s revenue growth was stronger, reaching R33.9 billion – boosted by equipment revenue growth of 18.4%.

Service revenue increased by 4.7% to R26.7 billion, which was supported by strong customer gains and growth in data and enterprise services.

Data revenue grew by 15.0% to R11.4 billion, contributing 42.6% of service revenue.

Now read: Vodacom hits 40 million for the first time

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2 reasons Vodacom’s earnings dropped in South Africa