Hang on if yield is im­por­tant

Finweek English Edition - - MARKET PLACE - By Simon Brown

With MTN off the radar as a pure mo­bile telco in­vest­ment (thanks to cor­po­rate is­sues), that leaves Vodacom as the only al­ter­na­tive and re­cent re­sults were all right but not thrilling.

Im­por­tantly, the div­i­dend has re­mained flat for the sec­ond set of re­sults in a row. While rev­enues are in­creas­ing, those in­creases are mod­est at best, with head­line earn­ings per share (HEPS) flat for the pe­riod. This was blamed on “a tax ad­just­ment in Tan­za­nia and for­eign cur­rency im­pacts”, with­out which Vodacom would have seen a very mod­est 3.5% in­crease in HEPS. The mo­bile in­dus­try is chang­ing as it moves from over-priced voice and SMS to be­com­ing es­sen­tially a low-mar­gin but prof­itable data util­ity. Glob­ally mo­bile com­pa­nies are try­ing to re­sist the change and Vodacom is in­tro­duc­ing video-on­de­mand as a solution to the prob­lem. But this is a long shot and we haven’t seen any ev­i­dence of it work­ing else­where. The div­i­dend yield is at­trac­tive at al­most 6% and the com­pany should be able to at least hold its div­i­dend, of­fer­ing share­hold­ers a rea­son to hang on if yield is im­por­tant. Oth­er­wise avoid.

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