Vodacom stock rises 3.28% in welcome trend
The resilient Vodacom’s stock shot up 3.28percent to close at R114.97 as it recorded a 1.1percent increase in operating profit to R24.5billion for the year ended in March, against increasing its overall subscriber base.
The mobile operator also slashed its full year dividend after issuing more than 100 million shares as part of the R16.4bn black economic empowerment (BEE) ownership transaction last year.
Vodacom group chief executive Shameel Joosub said the full-year dividend had been cut by 2.5percent to R7.95 a share from R8.15 a share in the year ending March 2018.
“The financial impacts of delivering on our promise of further reducing the cost-to-communicate in South Africa, combined with costs associated with concluding our new R16.4bn BEE ownership deal, is evident in the subdued increase in our operating profit,” Joosub said.
Vodacom issued 114.5million shares as part of the empowerment which was concluded on September 14, 2018. “This resulted in the non-cash, non-recurring shar-based payment charge of R1.4bn and transaction and finance costs of R295million being recognised in the current year, the combination of which resulted in a 100cents per share dilution,” Joosub said.
The group said service revenue from its biggest market of South Africa jumped 2.1percent to R55.7bn on the back of 1.5million new customers.
Group service revenue rose by 5percent to R74.2bn. Headline earnings a share fell 6.6percent to R8.62 a share in 2019, from R9.23 a share in 2018, although this was offset by an increase in contributions from Safaricom, the East African telecoms giant that has helped Vodacom’s profitability in the year under review.
Vodacom acquired a 34.94percent stake in Safaricom in August 2017, which contributed R2bn to the group's profit for the year under review.
“The Safaricom acquisition has proven to be a catalyst for extending our mobile money leadership position on the African continent and in ensuring that financial services have become a significant contributor to the Group’s revenues. In the past year, we effected 11billion transactions worth R2trillion to 36.1million customers across our Financial Services network, including Safaricom,” Joosub said.
Vodacom was lambasted by the Competition Commission for charging higher data prices last month. Joosub said the mobile giant's customers had enjoyed R2bn in savings as part of the company's ongoing pricing transformation strategy.
“A sharp reduction in our out-of-bundle tariffs contributed to the 37percent decline in effective data prices since the end of March last year,” said Joosub, adding that over a three-year period, data prices had fallen by 57percent, despite not having access to further available spectrum.
Ofentse Dazela, director for pricing research at Africa Analysis, yesterday said Vodacom’s International operation grew by 15.6percent, while South Africa's service revenue increased by 2.1percent, indicating that the company remained on the growth trajectory. “Overall, the results show that Vodacom remains resilient to economic challenges besetting the country at the moment, its strongest market that is currently characterised by unemployment, highly competitive mobile environment, volatile currency against major currencies, as well as operational challenges that became more pronounced as a result load shedding activities among other notable challenges,” said Dazela.
Peter Takaendesa, a portfolio manager at Mergence Investment Managers said Vodacom’s Africa operations recovered strongly, the same trend seen at MTN, but were largely offset by weaker revenue and operating profit in South Africa.
“Vodacom is still executing well, but its largest market, South Africa, is still very challenging and its key mobile competitors MTN and Telkom mobile have strengthened their management teams to better compete with Vodacom,” said Takaendesa.