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Mobile giant Vodacom posts weaker interim results after it is hit by initial start-up losses in new market Ethiopia

Mobile giant Vodacom posts weaker interim results after it is hit by initial start-up losses in new market Ethiopia

Vodacom’s share price dropped almost 6% yesterday after it said its net profit decreased due to financial market volatility and weaker prospects for the global economy.

The shares traded at an intraday low of R120.60 and has decreased by 11.6 percent in the past six months.

In its interim results for the six months ended September 30, 2022, the mobile operator said its net profit dropped by 9% compared with last year to R8.1billion.

Vodacom also flagged operating profits were down 5.6% from R14.1bn to R13.3bn. Headline earnings per share declined 9.5%, impacted by start-up losses in Ethiopia and higher finance costs as interest rates normalised to pre-Covid levels.

The group declared a gross interim dividend of R3.40 per ordinary share.

Revenue was up 7.7% year-on-year to R53.7 bn, supported by rand depreciation against Vodacom’s basket of international currencies. Service revenue increased 7.2% to R41.7bn over the reported period.

Vodacom Group CEO Shameel Joosub said: “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.”

Joosub said the war in Ukraine, which followed hard on the heels of a global health crisis, continued to result in increased inflationary pressures and elevated living costs in many countries across the world, including markets where Vodacom operated.

“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,” he said.

Vodacom also spent money on its network to enhance customer experience during Eskom load shedding.

"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 billion in batteries alone to enhance the resilience of our network so that we keep customers connected during extended periods of load shedding,” he said.

Joosub said Vodacom would leverage its newly acquired spectrum to accelerate its investment in next-generation mobile infrastructure.

The mobile operator also reported that it attracted an additional 3 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,“ it said.

The group said it had a double-digit increase in financial services customers to 63.1 million, including its affiliate Safaricom on a 100% basis.

Safaricom recently launched a telecommunication network in Ethiopia that is now available in 16 cities, with plans to extend to 25 towns by April 2023.

“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,” Joosub said.

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