Vodacom Q1 revenue jumps 37% on back of Egypt deal, weak rand

Vodacom Group revenue for the first quarter of its financial year grew strongly on the back of its acquisition of Vodafone Egypt and the rand's recent depreciation.

Group revenue increased almost 37% year-on-year (YoY) to R35.7 billion (US$2 billion), largely boosted by Vodafone Egypt, where revenue generated by financial services more than doubled and successful Ramadan and summer campaigns contributed to a 43.2% increase in data traffic.

Group service revenue was up 43.8% YoY, or 9.8% excluding Vodafone Egypt – which Vodacom officially acquired a 55% shareholding in from parent company Vodafone in December 2022.

"A number of encouraging trends were evident in the Vodacom Group's first quarter performance, despite the ongoing uncertainty impacting global markets and economies," said Vodacom Group CEO Shameel Joosub in a trading update for the three months that ended on June 30, 2023.

"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," he added.

Service revenue in Vodacom's home market of South Africa grew 3.9% YoY, underpinned by its contract segment, fixed and financial services.

"In South Africa, our R4 billion (US$222 million) investment over four years to mitigate the impacts of load shedding [power cuts] continues to pay dividends. We now invest more than R11 billion (US$611 million) a year into our South Africa 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," Joosub said.

Vodacom is still waiting for regulatory approval for its proposed acquisition of a joint venture stake of up to 40% in South African fiber company MAZIV.

African markets grow as mobile financial services boom

International service revenue increased 23.8%, driven by data revenue growth and a weaker rand, while Vodafone Egypt grew service revenue 27.6% in local currency as financial services revenue more than doubled.

Vodacom's international segment includes its operations in Mozambique, Lesotho, Tanzania and the Democratic Republic of Congo (DRC), and it also has part ownership in Safaricom's operations in Kenya and Ethiopia.

Joosub said the Ethiopian business has made good progress since its commercial launch in October 2022, already reaching 2.7 million customers, and is set to launch M-Pesa mobile money services by the end of September 2023.

"Financial services remains a clear strategic priority for the Group and produced a 46.2% increase in revenue to surpass the R3 billion (US$167million) 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," Joosub added.

Combined with financial services in Vodafone Egypt and Safaricom, the Vodacom Group's mobile money platforms processed US$360.6 billion over the last twelve months, up 5.8% YoY.

Around US$1 billion is transacted every day on Vodacom Group's mobile money platforms (Source: Image by wayhomestudio on Freepik.)

"In South Africa, growth was underpinned by our 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," he added.

Vodacom revenue from new services – financial and digital services, fixed and Internet of Things (IoT) – now accounts for almost one-fifth of the Group's total revenue, and it is targeting a contribution of 25-30% over the medium-term.

"Looking ahead, we are fully cognizant 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," Joosub said.

"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," he concluded.

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*Top image is of Vodacom Group CEO Shameel Joosub. (Source: Vodacom.)

— Paula Gilbert, Editor, Connecting Africa