South Africa: Vodafone Egypt deal instantly boosts Vodacom’s revenue

By Xolisa Phillip, in Johannesburg

Posted on Monday, 6 February 2023 12:46
A branch of South African mobile communications provider Vodacom in Cape Town is shown in this picture taken November 10, 2015. REUTERS

Newcomer Vodafone Egypt made a positive contribution to Vodacom Group revenue in the quarter ended in December 2022, according to the South African headquartered telco.

In the period under review:

  • Vodafone Egypt contributed more than R1.8bn ($102m) to group revenue.
  • The group generated R30.7bn in revenue attributable to the Vodafone Egypt transaction and rand weakness against Vodacom’s basket of international currencies.
  • Financial services revenue increased 30% to R2.6bn.

Vodacom’s acquisition of a 55% stake in Vodafone Egypt was concluded in December 2022 on the basis of a €577m ($622m) cash offer and the issuance of more than two million shares.

The deal, worth R43.6bn, the largest in the South African network operator’s history, has resulted in parent Vodafone increasing its shareholding in Vodacom to 65.1% from 60.5%.

The transaction means Vodacom’s population reach in the African market now exceeds 500 million. Egypt is Africa’s third most populous nation, with a population exceeding 104 million.

“The Vodafone Egypt acquisition presents a unique opportunity to advance our strategic connectivity and financial services ambitions through one of Africa’s premier telecom operators,” says Vodacom Group CEO Shameel Joosub.

“With an unbanked population of 74%, … we see a compelling addressable market opportunity for Vodafone Egypt, and scope to leverage … [the] Group’s financial services platforms, inter alia, M-Pesa.”

 

Joosub says Vodacom sees synergy potential from combining Vodafone Egypt’s in-house software development with the Group’s existing big data capabilities and talent sharing.

“As we evolve from a telco to a techco, access to skilled talent is critical, with Vodafone Egypt being an excellent source,” he says.

Digital inclusion

The Vodacom Group also continues to bolster its spectrum assets in its home market and international portfolio, with recent noteworthy purchases made in Tanzania and Mozambique.

“Digital inclusion remains a key focus for our international portfolio, where we invested R1.1bn in capital expenditure in addition to spectrum purchases in Tanzania and Mozambique during the quarter,” says Joosub.

Joosub explains that such investments “are an important contributor to driving data affordability and accelerating fixed-wireless access across our footprint”.

We expect that this investment will accelerate fibre reach in South Africa, fostering economic development and helping bridge South Africa’s digital divide

In Tanzania, Vodacom spent $63.2m acquiring spectrum which the company will use to “support network expansion plans and unlock further growth potential”.

South Africa, where the company was founded, remains the group’s largest market. At home, Vodacom successfully placed a R5.4bn (nearly $307m) bid for high-demand spectrum.

The company has paid the telecoms regulator R3.2bn, with the balance due once the government frees up more spectrum. This is expected to happen when South Africa finally switches from analogue transmission to digital broadcasting.

The mobile network operator is also awaiting regulatory approval from South Africa’s competition authorities for the proposed tie-up of its fibre assets with Remgro’s Community Investment Ventures Holdings.

“We expect that this investment will accelerate fibre reach in South Africa, fostering economic development and helping bridge South Africa’s digital divide,” Joosub says.

In Ethiopia, the Safaricom-led consortium, in which Vodacom has a minority stake, continues to make strides. There, the consortium has not only gone commercial as the first private mobile network licence holder, but will also obtain a financial services licence.

Since November 2022, the consortium venture has attracted one million active customers while continuing to rollout network infrastructure. So far, 21 Ethiopian cities have network access and the consortium aims to increase this to 25 by April 2023.

The Vodacom Group is scheduled to publish its full year results on or around 15 May 2023.

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