Vodacom Group records 30.4% boost in profits from its stake in Safaricom

Vodacom Group realized a 30.4% boost in profits from its stake in Kenya’s Safaricom according to the South African telco’s annual results for the year ended March 31, 2020.

Vodacom attributed the growth in profits from its Kenyan subsidiary to currency factors and inclusion of the new M-Pesa joint venture, as well as significant investments in network and infrastructure, an acceleration in pricing transformation and a 17.2% underlying increase in revenue from M-Pesa.

In its annual results announcement, Vodacom stated: ” Our investment in Safaricom, Africa’s second biggest telco by market capitalisation after Vodacom, delivered a 30.4% boost in profits from this associate, with growth bolstered by currency factors and inclusion of the new M-Pesa joint venture. Significant investments in network and infrastructure, an acceleration in pricing transformation and a 17.2% underlying increase in revenue from M-Pesa, all contributed to Safaricom’s success.”

M-Pesa continues to deliver on its promise of delivering financial inclusion, while at the same time positively contributing to economic growth in markets where it is ubiquitous. Having expanded the M-Pesa ecosystem, customers in our international markets, including Safaricom, now process more than US$14.7 billion a month in transactions through the platform.”

In early April, Safaricom and Vodacom announced completed the acquisition of the M-Pesa brand from the Vodafone Group in a transaction reportedly worth Kshs 1.4 billion.

South Africa’s Vodacom and UK’s Vodafone Group hold a combined 40 percent stake in Safaricom.

Apart from South Africa and Kenya through its stake in Safaricom, the Vodacom brand has a presence in Tanzania, the DRC, Mozambique and Lesotho.

With a majority of its users in Kenya where it made its debut in 2007, MPESA currently has a presence in Tanzania, Lesotho, DRC, Ghana, Mozambique and Egypt

Currently, 40 million customers use M-Pesa across all Vodacom Group operations, generating total revenue of R16.2 billion ($334.8 million) and growing at 22% a year.

“Our focus, with our newly created joint venture, is to ensure that we align all product roadmaps across our operations and continue to expand the M-Pesa ecosystem across all countries. This will include the roll-out of nano lending platforms and getting the system ready for a smartphone world, where we can on-board more partners in this space. Our nano lending platform is already being used by 17 million customers in Kenya and Tanzania where it is driving our commitment to promote financial inclusion,” stated Vodacom.

“Despite some top line challenges, Safaricom continues to increase shareholder returns, with profit after tax increasing 19.5%. Service revenue grew 4.8%, supported by strong customer acquisition, recovery of market share and mobile data returning to double digit growth. Underlying service revenue grew 5.9% for the year. This excludes the impact of the contraction in the betting industry, and the M-Pesa transactions that were made free in response to the COVID-19 pandemic. M-Pesa revenue grew 12.6% or 17.2% on an underlying basis, with customers increasing 12.2% to 35.6 million. Mobile data revenue grew 12.1% for the year, and 20.4% in the second half, as its recovery gains momentum driven by increased penetration and usage supported by strong uptake of our no-expiry bundle offers. Data customers grew 10.2% to 19.6 million, and usage exited March at 1.3GB per customer. Investment in capital expenditure was Kshs 36.1 billion for the period, a reduction of 3.1%. This yielded an improvement of 1.1 percentage points on capex intensity, recording 13.8% for the year. 4G coverage now stands at 77% up 20 percentage points,” according to Vodacom Group’s annual results statement.

Overall, Vodacom noted that the past year “has been characterised by strong customer growth” as the Group currently serves over 116 million customers, which includes 5.9 million new subscribers.

“It has been another stellar year for our International portfolio, where we recorded margin expansion for a second year, and further diversifies our currency exposure from the South African rand. An additional 4.0 million customers and increased demand for data and M-Pesa services in each of our operations contributed to a 12.5% increase in service revenue across our International operations,” the statement added.

Group revenues rose by 4.8% supported by Group service revenue growth of 5.0%. Total financial services customers recorded an increase of 12.8% to stand at 53.2 million, including an additional 6 million customers who moved to the brand in the course of the year. International operations delivered strong service revenue growth of 12.5%, with foreign currency translations boosting reported Group growth.

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