Vodacom is targeting single-digit growth as the constrained economic environment takes a toll on consumers.
The group reported a flat performance for the six months to September hurt by exchange-rate woes and tax adjustments.
Vodacom Group CEO Shameel Joosub said the forecast was kept low because of tough trading conditions.
Falcon Crest Asset Managers chief investment officer and portfolio manager Farai Mapfinya said the retail market, in which Vodacom and other telecom companies operated, was tough. "The share of wallet and semi-discretionary spending dynamics continue to be quite challenging.
"Communication, however, has become and will remain a crucial commodity which bodes well for the telco operators."
Vodacom’s headline earnings per share for the period was unchanged at R4.40, negatively affected by a tax adjustment in Tanzania and foreign currency costs. Excluding these, and the loss in the year before from associates, headline earnings per share grew 3.5%.
Group revenue rose 4.1% to R40.1bn. The dividend was unchanged at R3.95. However, group headline earnings per share and dividend dashed market expectations of 5%-10%, said Mergence Investment Managers’ Peter Takaendesa. "The key reasons for the softer results — relative to expectations — are largely the slowdown in its [operations in the rest of Africa] and a higher tax rate."
Vodacom has continued to execute well in SA. Its growth rate has remained steady at service revenue growth of about 6% over the past three quarters.
"They are clearly benefiting from the recent disruptions at [MTN]," Takaendesa said.
Vodacom’s total subscriber numbers rose 5.7% to 35.6-million over the review period.
Data remained the key driver for growth and rose 19.5% in revenue to R9.9bn, while active data customers were up 4.1%
Joosub said the group’s strategy of maintaining a network advantage and delivering value for money continued to yield rewards, despite a low-growth economic environment in SA and the short-term effects
of customer registration requirements in other African countries in which it operated.
Vodacom operates in Tanzania, Lesotho, Mozambique. and the Democratic Republic of Congo. Mozambique has ordered operators recently to disconnect unregistered subscribers. Vodacom’s operations outside SA had slowed from double-digit revenue growth over the past two quarters to flat revenue in the three months to September, Takaendesa said.
Vodacom will set aside 12%-14% of its revenue for capital expenditure. "With prices coming down and data usage growing rapidly, networks require continuous significant capital investment to provide greater capacity and coverage," Joosub said.