Vodacom raises its service revenue target despite Ethiopia’s start-up loss hurting profits

Due to growing costs and start-up losses in Ethiopia, Vodacom Group (VODJ.J) opened a new tab on Monday and announced a 10.8% fall in full-year profitability; nonetheless, the company raised its group service revenue target because of the performance of new services and its Egyptian business.

The South African firm, which is mostly controlled by Vodafone (VOD.L) of the United Kingdom, opens new tab, co-launched Safaricom Ethiopia in 2022 as a consortium, and is banking on the populous country to drive growth after approximately five years of investment. Vodacom directly owns a 5.7% share.

The largest telecom provider in South Africa reported that headline earnings per share decreased from 948 cents to 846 cents in the year that concluded on March 31.

“A combination of start-up losses in Ethiopia, higher finance and energy costs, the impact of absorbing inflationary pressures, and weaker exchange rates across markets, including the recent devaluation of the Egyptian pound, contributed to the 10.8% decline,” said Shameel Joosub, group CEO.

Vodacom shares were down 2.79% by 0940 GMT.

But thanks to the acquisition of Vodafone Egypt, the group’s revenue growth was greater than anticipated, rising by 26.4% to 151 billion rand ($8.21 billion). Service revenue increased by 29.1% to 120.9 billion rand.

Based on LSEG statistics, analysts had predicted that group revenue would increase to 146 billion rand on average.

Group service revenue growth was 9.2% on a pro-forma comparable basis, which was at the upper end of its medium-term target.

Vodacom, which has 203.1 million customers in Africa, increased the growth rate of its group service revenue target from mid-to-high digits to high single digits.

Reporters were informed by Chief Financial Officer Raisibe Morathi that the Egyptian company’s upgrade was the result of its successful navigation of macroeconomic obstacles and the enhanced performance of its other African ventures, particularly Mozambique.

Similar to its competitors, Vodacom has been transforming into a technology corporation in response to the growing demand for digital and financial services, fiber, and networked smart products.

In the medium run, Vodacom hopes to contribute 25–30% of group service revenue from new services. In South Africa, emerging services such as digital, fintech, fiber, and internet of things account for around 16.6% of service income.

$1 is equivalent to 18.3966 rand.