Ethiopia’s losses reduce Vodacom’s profit, but Egypt increases revenue. Vodacom’s (VODJ.J.) profitability took a blow in the first half due to start-up losses in Ethiopia. Still, revenue growth benefited from incorporating Vodafone Egypt, preventing further profit drops. Vodacom is a South African telecom provider.
The firm, which is the largest telecoms operator in South Africa and is majority-owned by Britain’s Vodafone Group (VOD.L), made the largest acquisition in the history of the telecoms operator in 2021 when it purchased a 55% interest in the Egyptian subsidiary of Vodafone for around 43.6 billion rand ($2.3 billion).
Beginning on December 8, 2022, the business operations were merged. Vodacom and a group that includes Vodafone and Kenya’s Safaricom, a joint venture between the two South African companies, founded Safaricom Ethiopia last year. They hope the populous nation will power development after around five years of investment.
Group Chief Financial Officer Raisibe Morathi informed reporters that the Ethiopian firm was anticipated to reach a breakeven point in the fourth year, with peak profits before interest, tax, depreciation, and amortization losses expected in the current fiscal year, which ended in March.
The group’s headline earnings per share (also known as HEPS), a measure of profit, decreased by 4.2%, going from 457 cents a year earlier to 438 cents in the six months ending September 30. A deferred tax asset from a prior year that was recognized in Tanzania and increased interest rates contributed to a decrease in HEPS.
At 10:46 GMT, Vodacom shares had dropped by 4.26% and traded at 103 rand. As a result of the purchase of Vodafone Egypt and the rand’s devaluation relative to a selection of other international currencies, the group’s service revenue increased by 42.2%, reaching 59.3 billion rand.
According to Vodafone’s Group CEO Shameel Joosub, Vodafone Egypt contributed 16 cents to HEPS and 14.3 billion rand to the group’s service revenue.
When the contribution from Vodafone Egypt is taken out of the equation, the rise in group service revenue was 7.9%, or 4.1%, on a normalized basis. A resilient performance in South Africa underpinned this growth, he noted.
Investments to keep the network operational during power outages contributed to a 4% increase in service revenue in South Africa, the company’s largest market. During this period, the data traffic growth rate reached 45.2%.
Vodacom will spend approximately one billion rand during this fiscal year to mitigate the effects of power outages, following an investment of 4.5 billion rand spread out over four and a half years.
The nation’s telecommunications companies have been investing a lot to add diesel generators, batteries, and solar panels to keep their networks operational in the face of power outages that can last up to ten hours per day due to the failing national utility, Eskom.