• Vodacom reports minimal gains and a few losses in its trading update for the third quarter of its 2024 financial year.
• One of the more exciting areas of the business is its financial services which are performing incredibly well according to Vodacom.
• The Please Call Me debacle continues to be a yoke around Vodacom’s neck with it warning that it could be on the line for as much as R9 billion.

Vodacom has released its financial results for the third quarter of its 2024 financial year[PDF]. Across the group there are a few wins but there are also a few concerns, despite Vodacom “normalising” its results.

Before we dive into the results, a note on normalisation. In a bid to make its results more comparable Vodacom chooses to ignore several factors such as trading foreign exchange, foreign currency fluctuation on a constant currency basis – using the current year as base – and excludes the impact of merger, acquisition and disposal activities, at a constant currency basis where applicable, to show a like-for-like comparison of result.

To our mind, this clouds the results but thankfully Vodacom also includes its results without the normalisation factored in. For the purposes of this report, the normalised growth will be featured in brackets where applicable.

The company reports that revenue for the quarter clocked in at R39.5 billion, a figure 1.6 percent higher (12.6 percent) than it was in Q3 2024. Unfortunately the network operator reported a loss in group service revenue bring in 1.4 percent less than it did in 2023. Vodacom says that when normalised this figure is actually 11.6 percent higher than it was in 2023. However, R30.6 billion in group service revenue was still less than R31.1 billion when we checked this morning.

The big driver for revenue in terms of telecommunications was growth in the South African prepaid market according to Shameel Joosub, group chief executive officer at Vodacom. As for the losses, Joosub and co. have an explanation.

“In particular, the quarter was positively impacted by accelerated growth in South Africa’s prepaid market in addition to another stellar performance in Egypt and Tanzania while network operators in Mozambique, including Vodacom, have been hampered by post-election tensions since October 2024. On a normalised basis, which removes the impact of currency fluctuations, Group service revenue accelerated to 11.6%, which is comfortably ahead of our stated medium term target,” the CEO writes.

But by far the biggest surprise in these results was the gains seen in Vodacom’s financial services.

“Our financial services business, a clear strategic priority for the Group and the largest contributor to beyond mobile, has seen the value of mobile money transactions facilitated by our platforms increase 19.1% in US dollars. We now process an impressive US$1.2 billion a day. This highlights the scale of this business and solidifies our position as Africa’s largest mobile money platform by transaction value processed. Excluding Safaricom, the Group generated R3.6 billion in service revenue in the quarter, up 5.7% or 17.2% on a normalised basis,” Joosub reports.

This is quite the about face from Vodacom which, nine years ago, shuttered its M-Pesa offering citing a failure to achieve a critical mass of users. We have to wonder how big the platform would be today had Vodacom stuck by it.

Regardless, financial services looks like a massive market for Vodacom and it intends to push deeper into the sector. The company has increased its agent network (which supports core financial services products) to 454 000 people, a 35.1 percent increase.

The Makate matter matters

As part of this report Vodacom highlighted the ongoing battle with Kenneth Nkosana Makate over the Please Call Me issue. The company is still waiting for the Constitutional Court to decide on its appeal which was heard in November 2024.

Vodacom notes that Joosub offered Makate R47 million, an offer the former Vodacom employee rejected, instead returning to the courts. Vodacom reports that Makate is looking for compensation to the tune of R9.4 billion but this figure could go up if interest from 2019 is added to the bill. That figure could seriously impact Vodacom’s books if Makate is awarded and accepts that sum as, based on these results, the fine could represent 23.7 percent of Vodacom’s revenue.

In even more bad news for Vodacom, the telco is still struggling to claw back roughly 3 million customers it lost between December 2023 and June 2024. Vodacom reports that customer numbers now sit at 50 million, 1.1 percent lower than it was in December 2023. Granted, Vodacom lost these customers because it kicked inactive customers from its books. That’s still not good news though and one has to wonder why there were so many inactive customers in the first place.

With all of that having been said, the pivot into financial services is going very well for Vodacom and we suspect we’ll see more from that segment as the year wears on.

Vodacom’s financial year ends in March and those results should make for a very interesting read, especially if the Please Call Me matter is concluded before then.