Vodacom seeks African growth opportunities

Published Nov 13, 2012

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Asha Speckman

VODACOM, which was suffering from a decline in revenue of basic communication such as SMSes in South Africa, was searching more proactively for expansion opportunities in Africa, its new chief executive, Shameel Joosub, said yesterday.

“The reality is in South Africa the market is maturing and in five years to come growth will be slower. We’ll look both at greenfields and market consolidation in the markets we are operating in,” Joosub said.

There were several smaller companies in the countries in which Vodacom was present that were not affiliated to any larger cellphone rivals, he said.

Vodacom last launched a new operation in 2003 when it established a subsidiary in Mozambique.

The company’s most significant acquisition was of Gateway Communications in 2008 for $675 million (R5.8 billion).

“We are now more proactively looking… I wouldn’t say there’s any pressure for us,” Joosub said. “To sustain current growth the group would have to explore expansion now.”

Joosub said Vodacom expected low single-digit growth in the medium term from current operations. Focused growth areas included machine-to-machine platforms, mobile financial services, and digital lifestyle services.

Vodacom stocks rallied 4.95 percent to close at R116.39 on the JSE yesterday.

The company’s main market is South Africa but growth is realised from its operations including Tanzania, Lesotho, the Democratic Republic of Congo and Mozambique. International operations account for 20 percent of group service revenue, from 16 percent a year ago.

An equity analyst who spoke on condition of anonymity said yesterday that during the past six to 12 months the competitive landscape in Africa had “eased a bit”. The analyst said there was talk of Vodacom acquiring new licences in countries such as Angola and Ethiopia while the firm could take over parent company Vodafone’s assets in Ghana.

Joosub declined to comment on the markets that showed most potential.

The analyst said Vodacom was unlikely to venture outside of Africa into regions such as the Middle East on the trail of rival MTN. “Vodafone wouldn’t allow that,” he said adding that Vodafone, which holds 65 percent of Vodacom, preferred that its subsidiary maintain an African focus.

Vodacom was in a better position to pursue expansion having rid itself of the loss- making unit in Gateway Communications, the analyst added.

Operating profit for the first half to September rose 22.8 percent despite lower prices in the South African market.

Frost & Sullivan analyst Lehlohonolo Mokenela said the “pressure to cut prices is changing the rules of the game for mobile operators. Operators are being forced to become creative with new tariff structures to ensure price reductions don’t start cutting their margins”.

Headline earnings a share, excluding one-time items, increased to R3.96 from R3.24. It was boosted by a 36.5 percent increase to R6bn in service revenue from international operations.

Customer numbers outside of South Africa jumped 19 percent to 19.3 million subscribers. Strong demand for data services boosted group data revenue by 20 percent to R4.7bn.

Smartphone penetration in South Africa grew 36 percent during the period under review.

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