Vodafone African unit Vodacom’s earnings fall as tough competition weighs on prices


“It’s been a tough year, probably one of the most challenging we’ve ever faced,” - CEO Shameel Joosub

VODACOM Group Ltd., the African unit of U.K. wireless carrier Vodafone Group Plc, said full-year earnings declined as increased competition and regulatory changes weighed on call prices.

Earnings per share excluding one-time items were 8.60 rand ($0.73) in the year through March, down from 8.96 rand a year earlier, Johannesburg-based Vodacom said in a statement on Monday. That compares with an 8.79 rand median estimate by analysts surveyed by Bloomberg. Sales rose 2.1% to 77.3 billion rand.

“It’s been a tough year, probably one of the most challenging we’ve ever faced,” Chief Executive Officer Shameel Joosub said on a conference call with reporters. The South African business was affected by regulatory cuts to fees charged to competitors for calls to its network, a weak economy and increased competition, he said.

Vodacom, 65% owned by Newbury, England-based Vodafone, is expanding in sub-Saharan Africa to offset the pressure on revenue growth in its home market. 

Tanzania and the Democratic Republic of Congo (DRC) were also affected by tougher price competition, while the company has further operations in Mozambique and Lesotho. Vodacom’s customer numbers rose 7.2% in the year to 61.6 million.

Data potential

The shares fell 0.8% to 142.90 rand as of 9:48 a.m. in Johannesburg, paring the year’s gain to 11% and valuing the company at 213 billion rand.

MTN Group Ltd., second to Vodacom in the South African market in terms of subscribers, is up 5.7% in 2015. Vodafone’s other African operations include businesses in Egypt and Ghana and a 40% stake in Safaricom Ltd. of Kenya.

Increasing revenue from Internet use and other data services will drive Vodacom’s growth, Joosub said. Data sales increased by 25% in the year, while data customer numbers gained 16% to 26.5 million.

“The capital investment we’ve put in is helping us to accelerate the data growth potential” in South Africa, Joosub said. “Only 51% of our customer base is using data now.”

The company is awaiting regulatory approval for a deal to buy local Internet provider Neotel Pty Ltd. from Tata Communications Ltd., after agreeing to a 7-billion rand price a year ago.

The deal would enable Vodacom to extend Internet services for small-to-medium sized businesses.

“We’re still confident of the transaction getting done,” Joosub said. “Hopefully in the next two weeks or so we should have an indication of where we stand.”

Vodacom’s biggest competitors in South Africa are MTN and closely held Cell C Pty Ltd., which last week said it would offer to subsidise the cost of ending contracts with other wireless operators to attract more customers.

“It’s a marketing gimmick,” Joosub said. “The impact of these things will be very small.”

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