Vodacom Resets Targets With Post-Pandemic Light on Horizon
Vodacom Group Ltd. reinstated growth targets based on an expected economic recovery from the Covid-19 crisis in 2022, and said it has the financial strength to take part in a long-awaited auction of broadband spectrum in South Africa.
The country’s largest mobile-phone company now sees mid-single digit growth in both service revenue and operating profit over the next three years, according to a statement on Monday. The move follows a decision by the Johannesburg-based company to scrap forecasts in the early phase of the pandemic, in response to the uncertain environment.
South Africa’s telecommunications industry has held up better than some during the coronavirus era, with soaring household-data bills helping to offset the impact of slower economic activity. In Vodacom’s home market, data usage surged 86% in the six months through September, and the company boosted investment in network infrastructure over the period to 6.6 billion rand ($427 million).
The shares traded 1.4% higher as of 9:07 a.m. in Johannesburg, extending a climb for the year to 12%.
Next up for the company, which is majority owned by the U.K.’s Vodafone Group Plc, is to prepare for South Africa’s sale of more than 8 billion rand of spectrum, pledged in early October as part of a range of government measures to revive the economy. Vodacom and MTN Group Ltd., its chief rival, have long called for the move, but political disputes over how it should proceed have thwarted the process.
“We have a strong balance sheet, and we have adequate headroom to take on more debt at favorable rates to take part in a spectrum auction,” Vodacom Chief Executive Officer Shameel Joosub said on a call with reporters.
Vodacom, which has international operations in Tanzania, Mozambique and the Democratic Republic of Congo, is among carriers planning to bid for new telecom licenses in Ethiopia, though an ongoing military conflict in the Horn of Africa nation is giving the carrier cause for concern.
“We are monitoring the situation and we will make a call closer to the time,” the CEO said. Vodacom is planning to take part alongside Vodafone and Kenya’s Safaricom Plc, in which it owns a minority stake.
Fighting erupted between Ethiopia’s central government and the northern Tigray region in early November, leading to the deaths of hundreds of people to date. The battle won’t distract the government from implementing reforms, including the telecom privatization, State Finance Minister Eyob Tekalign said last week.
Vodacom reported first-half gains in revenue, earnings and customer numbers, and will pay an interim dividend of 4.15 rand, up 9% year-on-year.