• Vodacom Group posted higher revenu,e but profits are 9 percent lower than in 2021.
• The firm points to a host of challenges it faces in the markets it operates in that contributed to lower profits.
• Vodacom continues to invest in its network with R5.8 billion being spent on infrastructure in the last six months.

One of South Africa’s largest mobile network operators, Vodacom, has posted its interim results for the last six months today.

While revenue is up 7.7 percent (5 percent when normalised and international exchange rates are accounted for), the group has detailed a number of struggles it faced over the last half year.

While revenue amounted to R53 billion, the firm only saw a net profit of R8 billion, a nine percent drop compared to the same period in 2021.

Among the pressures it faces, Vodacom says that inflationary pressures brought about by the COVID-19 pandemic as well as the Russia-Ukraine War have elevated the cost of living. This means that buyers are more cautious with how they spend their money and are likely to opt for low-cost communication solutions rather than making use of video calling and using data recklessly.

The mobile network operator says that it has attempted to absorb these costs and sought to accelerate initiatives that deliver greater value to strained customers.

However, the firm also faces startup costs in Ethiopia where Vodacom holds a minority stake in Safaricom Ethiopia. These costs contributed to a 9.3 percent decline in earnings per share.

“Encouragingly, the fact that it was recently announced that Safaricom Ethiopia will be awarded a financial services licence is expected to accelerate our ambition to transform lives in Africa’s second most populous country. We have already launched our network in 16 cities in Ethiopia with plans to expand services to 25 cities by April 2023, to reach our first milestone of 25 percent population coverage,” explained Vodacom Group chief executive officer, Shameel Joosub.

The other reason Vodacom points to for lower profits this half-year is continued investment into its network. In this last six-month period, Vodacom ploughed R5.8 billion into its network. A large portion of that sum – R2 billion – was used for batteries to keep Vodacom’s infrastructure operational during loadshedding.

In somewhat good news, Vodacom’s super app, VodaPay, has been downloaded some 3.5 million times and has reached 2.2 million users. The Vodacom Group CEO adds that in the near term the firm plans to add cash-in and cash-out capabilities and scale its micro loan business.

“Looking ahead, we expect that the Vodafone Egypt acquisition and Community Investment Ventures Holdings (Proprietary) Limited (CIVH) joint venture will enhance our system of advantage and provide scope to accelerate the growth profile of the Vodacom Group. In Egypt, the transaction obtained approval from the National Telecom Regulatory Authority and remains subject to the Financial Regulatory Authority’s approval and other key suspensive conditions as set out in the circular to shareholders published by the Company on 10th December 2021,” added Joosub.

While Vodacom insists to investors it is committed to delivering value, the fact that earnings per share is down nearly 10 percent is likely to cause concern.

Let’s see what Vodacom can do in the next six months.