Vodacom’s annual results show minimal growth in operating revenue

Vodacom has this morning announced its annual results for the year ending 31st March 2019 and things look good for the company.

Before we dive into the results, Vodacom adopted the IFRS 15: Revenue from Contracts with Customers standard of reporting on 1st April 2018. Previously the firm had used IAS 18 and the two don’t really align with one another.

For comparative purposes then Vodacom has listed results using the IFRS 15 standard as well as the IAS 18 standard with comment from the firm pertaining exclusively to IAS 18.

So let’s look at the results.

Revenue for the year grew 4.3 percent to R90 billion while service revenue grew five percent to R74 billion year-on-year.

Operating revenue also grew but at a rather low 1.1 percent year-on-year.

“The financial impacts of delivering on our promise of further reducing the cost-to-communicate in South Africa, combined with costs associated with concluding our new R16.4 billion BEE deal, is evident in the subdued increase in our operating profit. This masks an otherwise solid operational performance for the Group, where service revenue grew by 5.0%, led by strong performance in our International portfolio,” Vodacom Group chief executive officer Shameel Joosub said of the dip in operating revenue.

Revenue from mobile contracts grew just 1.2 percent year-on-year while mobile prepaid revenue grew an impressive 7.9 percent year-on-year in comparison.

“We connected an additional 6 million customers to the Vodacom and Safaricom networks, a 5.8% increase to 110 million in total,” said Joosub.

But things locally aren’t so peachy.

Service revenue is only up 2.1 percent year-on-year in South Africa with international service revenue much stronger with 15.6 percent growth.

In addition, while prepaid and contract customers grew slightly (2.9 percent and 8.9 percent year-on-year respectively) data customers declined from 20.3 million to 19.9 million. Sure, it’s not a massive dip but with Vodacom no longer allowed to charge out-of-bundle data rates without explicit permission from customers we do wonder how this will affect revenue from data moving forward.

Looking at Safaricom, Vodacom says its acquisition continues to pay dividends. Revenue from Safaricom grew 7 percent whil the total customer base grew 7.7 percent to 31.9 million customers.

M-Pesa is also exhibiting strong signs of growth with 30-day active M-Pesa customers growing 10.2 percent to 22.6 million.

All in all these results are decent for Vodacom in a market that is rather turbulent and awash with changes.

How the firm will fare in a new regulatory environment and with a push for 5G happening globally remains to be seen but the firm appears to be stable and that’s about as much as its investors could ask for.


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