Ethiopia start-up loss impacts Vodacom profit, service revenue target upgraded

Vodacom Group, the largest telecoms operator in South Africa, has reported a 10.8% decline in full-year earnings due to start-up losses in Ethiopia and rising costs. Despite this, the company has upgraded its group service revenue target thanks to its Egyptian unit and the performance of new services.

The company, majority-owned by Britain’s Vodafone, co-launched Safaricom Ethiopia in 2022 as part of a consortium, with hopes that the populous nation will drive growth after years of investment. Vodacom has a direct 5.7% stake in the venture.

CEO Shameel Joosub attributed the decline in earnings to start-up losses in Ethiopia, higher finance and energy costs, inflationary pressures, and weaker exchange rates across markets. However, the company reported better-than-expected revenue growth of 26.4% to 151 billion rand, with service revenue surging 29.1% to 120.9 billion rand, boosted by the acquisition of Vodafone Egypt.

Vodacom, with 203.1 million customers across Africa, has upgraded its group service revenue target to high single-digit growth from mid-to-high-digit growth. This upgrade is attributed to the Egyptian business overcoming macro-economic challenges and improved performance in other African operations, especially in Mozambique.

The company is transitioning its business from being solely a mobile operator to a technology company, as demand for fibre, financial and digital services, and interconnected smart devices increases. Vodacom aims to have new services contribute 25-30% to group service revenue in the medium term, with 16.6% of service revenue in South Africa already coming from new services like digital, fintech, fibre, and Internet of Things.