Vodacom Group CEO commented:
Despite ongoing financial market volatility and weaker prospects for the global economy, Vodacom Group’s resilient revenue performance in the first quarter continued into the second quarter, evidenced by the 7.7% increase in Group revenue to R53.7 billion in the first half of the current financial year.
The war in Ukraine, which followed hard on the heels of a global health crisis, continues to result in increased inflationary pressures and elevated living costs in many countries across the world, including markets where Vodacom operates. Vodacom has attempted to absorb considerable inflationary costs from the dramatic increase in energy costs as far as possible and, as a purpose-led organisation, has sought to accelerate various initiatives to deliver even greater value to financially strained customers.
These efforts, coupled with expected start-up costs associated with the recent launch in Ethiopia of a national telecommunications network through Safaricom Ethiopia, in which Vodacom holds a minority and which is accounted for as an associate, contributed to a 9.3% 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% population coverage.
We continue to transform lives in South Africa where we were recognised as a level one Broad-Based Black Economic Empowerment (B-BBEE) contributor for a fourth consecutive year and remain one of the JSE’s most transformed companies. As Vodacom Group, we continue to make good progress in addressing climate change. In our role as a partner of the COP27 UN Climate Change Conference hosted in Egypt earlier this month, we re-affirmed our pledge of halving the Group’s environmental impact by 2025.
One of our many purpose-led initiatives which I am particularly proud of is our mobile healthcare programme in Tanzania called ‘m-mama’, a service that provides emergency transport for pregnant and post-partum women. Tanzania has one of the highest maternal mortality rates in the world, many of which could be prevented by reducing delays in receiving care. ‘M-mama’ is expected to save the lives of around 9 000 mothers and babies over the next five years. It is estimated that the service has already helped reduce the maternal mortality rate by 30% in the Lake Zone region in Tanzania, showcasing what the right partnerships and digital solutions can achieve.
Substantial investments into technology and our networks continues to resonate with customers, having attracted an additional 3.0 million customers in the period. This means we now serve 132.6 million customers across our footprint, where we now have an addressable market of more than 400 million people, with Vodafone Egypt set to add further scale. Our efforts to deepen financial inclusion continue to thrive, supported by the double digit increase in financial services customers to 63.1 million (including Safaricom on a 100% basis). We are Africa’s leading fintech player measured by a processed transaction value of US$355.2 billion over the last twelve months, up 17.6%.
Tanzanians in particular have benefitted from significant reductions in mobile money levies, with the government implementing decreases of up to 43% effective from 1 July 2022. This helped drive an additional 19.5% increase in the number of Tanzanians using M-Pesa, and is clearly supportive of financial inclusion.
Accelerated growth of 39.3% in the second quarter saw our M-Pesa revenue end the six-month period 25.2% higher at R3.0 billion, accounting for nearly a quarter of International service revenues. In addition to M-Pesa’s recovery, strong data growth and foreign exchange tailwinds largely contributed to the 17.9% growth in service revenue from our International operations to R12.6 billion.
In South Africa, we invested R5.8 billion in our network – the most in a six-month period – to further enhance the customer experience at a time when the country experienced record levels of power outages. In the past two years, we invested over R2.0 billion in batteries alone to enhance the resilience of our network so that we keep customers connected during extended periods of loadshedding. At the same time, we continue to work closely with Eskom to find a renewable energy solution for the benefit of our planet and customers, having announced in September 2022 an in-principle agreement with South Africa’s energy utility to pilot a programme that would see Vodacom South Africa source its electricity from renewable independent power producers and contribute this into the national grid.
It is also particularly pleasing to see that the investments into our South African network – more than R50.0 billion over the past five years alone – have culminated in further extending our Net Promoter Score (NPS) lead over our nearest competitor while at the same time driving growth from our new services – such as financial and digital services, fixed and IoT. In addition to increased demand for personalised bundles and strong equipment sales, these factors contributed to a 4.9% rise in revenue in our largest market. Underpinned by an almost 20% increase in insurance policies, revenue generated from financial services improved 8.1% to R1.4 billion. Launched almost a year ago, super-app VodaPay, reaches 2.2 million registered users through 3.5 million downloads while near-term plans to add cash-in and cash-out capabilities and scale our affordable consumer micro loans positions this business well to expand our offerings and drive deeper penetration of financial services.
Vodacom has a proven track record as a resilient company, and we are committed to ensuring that we follow our purpose of connecting people to a better future while delivering value for our shareholders.
Like many other companies, the operating environment that we face requires an unwavering focus to deliver our strategy, to meet our business objectives and to serve our customers. We continue to act swiftly so that we have the right measures in place – including our commercial initiatives and cost efficiency programmes – to help mitigate the impacts from the global macroeconomic risks.
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 Egypt’s National Telecom Regulatory Authority and remains subject to exemption from the Financial Regulatory Authority’s approval and other key suspensive conditions as set out in the circular to shareholders published by the Company on 10 December 2021. Our strategic acquisition of a joint venture stake of up to 40% in CIVH, recently received approval from ICASA subject to licence conditions such as open-access and remains subject to Competition Commission approval.