Vodacom hikes dividend amid data traffic surge

Vodacom on Monday (16 November) reported strong growth during its interim period ended September 2020, due to a surge in data usage, and culminating in a 9% hike in dividends.

“To help cope with sharp increases in data traffic and shifts in customer behaviour patterns, we accelerated network infrastructure spend over the six-month period to R6.6 billion, including R5 billion in South Africa, keeping families connected, enabling businesses to operate, facilitating online learning and assisting governments in providing critical services,” said Shameel Joosub, Vodacom Group chief executive officer.

“In South Africa, data usage surged 86%, as connectivity demands changed with a need to work, entertain and educate from home, and as we made substantial reductions in monthly data bundle tariffs.”

He said that the launch of ConnectU, which provides zero-rated access to a wide range of websites, including jobs portals and online learning platforms and discounted offers for poor communities, supported higher usage.

Vodacom said it added 4.1 million customers, to serve a combined 120 million customers across the group, including Safaricom.

Operating highlights

  • Group revenue up 7.8% to R47.8 billion, underpinned by service revenue growth of 7%;
  • Operating profit climbed 12.3% to R14.5 billion;
  • South Africa service revenue grew 7.1%, driven by an acceleration in customer service revenue in the second quarter;
  • Total financial services customers, including Safaricom, up 13.9% or 6.7 million to 54.8 million;
  • Headline earnings per share up 15.7%, boosted by a one-off deferred tax rate adjustment of R0.7 billion in the period;
  • Declared an interim dividend of 415 cents per share up 9.2%;
  • Medium-term targets reinstated.

Service revenue was underpinned by strong growth from the consumer and enterprise businesses in South Africa, where service revenue rose 7.1% despite reductions of up to 40% in monthly data bundles which came into effect on 1 April 2020.

Joosub said he expects consumer spending to recover as trading and economies re-open from lockdowns.

He said that Vodacom’s strategic investment in Safaricom delivered a 52.2% boost in operating profit, buoyed by currency factors and a one-off deferred tax rate adjustment of R800 million.

Safaricom’s local currency results reflect the impact of depressed economic activity and lower M-Pesa P2P monetisation, related to the Covid-19 pandemic.

Safaricom accelerated capital expenditure by 25.5%, supporting platform growth and a notable financial improvement into the second quarter compared with the first quarter.

Looking forward, Joosub said that Vodacom remains cautious about the pace of economic recovery across the group’s markets as disposable income will remain under pressure as a result of unemployment and depressed economic activity.

“Still, we remain steadfast in our quest to entrench Vodacom Group as a leading pan-African technology company and firmly believe that our investment into financial, digital and lifestyle services will increasingly provide opportunities to deepen our relationship with the 120 million customers who choose to use the Vodacom Group network across our footprint,” he said.

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