• This year saw Vodacom achieving a number of significant milestones.

    CFO's statement

    We diversified the economic portfolio of the Group with the acquisition of a stake in Safaricom in Kenya, and we widened our shareholder reach through the listing of Vodacom Tanzania, which attracted more than 40 000 local individual investors. We delivered total ZAR shareholder return of 6.2%, and will be returning a total dividend of more than R14 billion back to shareholders this year.

  • Till Streichert
    Till Streichert

Our strategy of best network, best service and best value, has resulted in our operations in South Africa, delivering robust service revenue growth despite a low GDP growth environment, while our International segment growth also improved throughout the year. This growth was supported by an additional 7 million customers coming onto the Vodacom network across our operations. The combined reach of Vodacom and Safaricom has expanded to 103 million customers across Africa.

Net profit increased 18.6% to R15.6 billion, boosted by the Helios Towers Tanzania sale and our share of attributable profit from Safaricom. Safaricom contributed R1.5 billion to profit for the first eight months, after deducting the amortisation of fair valued assets.

Headline earnings per share (HEPS) remained constant at 923 cents per share, impacted by the dilution from 233.5 million shares issued to acquire the Safaricom stake. The Board resolved to declare a final dividend of 425 cents per share, bringing the full year dividend to 815 cents per share.

South Africa delivering under economic uncertainty

Vodacom South Africa delivered service revenue growth of 4.9%. This was achieved amidst a backdrop of economic growth of ~1% during the year, and reduced effective pricing in both voice and data through our bundle strategy.

During the year, concerns surrounding South Africa's macroeconomic environment led to the sovereign credit rating downgrade in April 2017. To manage the potential interest rate volatility, we took a balanced and neutral approach and re-negotiated our fixed-to-floating debt exposure to ~50% on existing loans, thereby creating stability in finance costs. This approach has provided us with a natural hedge, allowing us to balance protection when interest rates increase, as well as going with the market when rates decrease.

Our pricing transformation strategy continues to show progress. Reducing out-of-bundle spend for customers has been core to this, and was achieved by improving customer data usage notifications, reducing out-of-bundle rates by as much as 50%, introducing more value offers on contract plans, and increasing bundle adoption through personalisation through 'Just 4 You'. Our strategy provides a more service-focused approach that presents customers with specific bundles to suit their individual needs.

The opportunity for data growth remains strong building on the 12.8% growth achieved in the context of changes in out-of-bundle rates. In the year ahead, the focus will shift to implementing ICASA's recently published End-User and Subscriber Service Charter Regulations, which will reduce out-of-bundle spend and exposure for customers. We will offset the negative financial impact through elasticity, driving our data device strategy, and other commercial actions through our personalised bundle offers to customers. Although these actions have a short-term impact on revenue growth, we believe that, together with our bundle strategy, they are necessary to ensure sustainable growth. What makes me confident is that our average smart device usage of 784 MB per user is still three to four times lower than in many other developed markets.

Our Enterprise strategy to deliver a holistic product offering to business has reported double-digit growth at 10.8%, now contributing 25.7% to our revenues. Service revenue from fixed services increased 55.6%, driven by the inclusion of wholesale transit revenue (a new low margin business) connectivity revenue, and Cloud and Hosting services. Enterprise mobile customer revenue was flat with a slow take-up amongst new departments as part of the government contract we were awarded in September 2016. The sign-up of new departments is set to offset the increased discounts as part of this contract, and it is expected that the sign-up from these contracts will accelerate in the year ahead.

International growth accelerating

Our strategic focus areas of data and M-Pesa delivered pleasing growth of 7.4%*, with service revenue reaching R16.8 billion. Tanzania delivered on their strategy in a highly competitive environment, resulting in good revenue and customer growth. Mozambique and Lesotho produced excellent results, with solid execution in data and M-Pesa monetisation. The DRC has seen an improvement, with stabilisation in currency and the macroeconomic environment.

We are making good headway in meeting the growing demand for data, by expanding our data networks, improving customers' network experience in high-demand areas, and investing in business intelligence solutions for smart product offers. Our affordable smart device strategy, coupled with 'Just 4 You' propositions in each of our markets, is helping to monetise data demand which remains a priority in our International markets.

M-Pesa revenue grew strongly, contributing 13.8% to International service revenue. We now have 11.8 million M-Pesa customers. We will continue to drive M-Pesa through new solutions such as lipa kwa M-Pesa in Tanzania and growing our agent network in Mozambique.


Safaricom finished the year with good momentum despite a relatively volatile political environment. Service revenue grew 10.0% and EBIT grew 12.6%. Underpinning the results was strong expansion of Safaricom's customer base and strong growth in both data and M-Pesa revenue. The continued good performance of Safaricom demonstrates how we strategically undertook to diversify the Group's economic exposure and earnings profile in a single transaction by acquiring a stake in a premier East African telecom operator.

Going forward, we will be deepening our relationship with Safaricom to ensure that we grow value for both businesses. Our focus areas will be expanding the M-Pesa ecosystem, and developing our International operations to get to the same levels of sophistication as Safaricom. We will share our Big Data learnings with Safaricom, both in personalised offers, and finally expand on our Enterprise opportunity, especially in East Africa.

Embracing Big Data, Artificial Intelligence and machine learning

A key pillar in improving stakeholder value is to deliver deeper insights in the business through Big Data analysis, machine learning and improved reporting. In finance, our strategy is to drive digitisation of our reporting frameworks, with the aim of delivering better business insights, facilitating swifter decision-making, and using robotics automation to improve the efficiency of repetitive processes.

The adoption of IFRS 15 has been a significant project for the finance team and was successfully implemented for all our markets. During the 2019 financial year, we will start reporting our results on an IFRS 15 accounting basis, while we will still disclose the existing IAS 18 basis for comparative purposes.

Delivering shareholder returns

Over the past three years, we have returned R38 billion in dividends to our shareholders, maintaining an average dividend yield of 5.4%. Vodacom's return on capital employed (ROCE) rebased from 45.4% to 30.5% due the acquisition of Safaricom which added R42 billion to our asset base.

Protecting shareholder value and delivering long-term shareholder return requires us to adhere to highest standards of corporate governance and financial control. The recent series of governance failures in South Africa, involving large corporates, public institutions and audit firms, has destroyed shareholder value. Restoring trust through evidencing good governance and control is paramount.

We have adopted the King IV framework and have well-developed Board and governance structures at Vodacom Group. We have similar Board and governance structures in our operating companies outside of South Africa. Our Code of Conduct provides standards for integrity, competence, responsibility, accountability, fairness and transparency, and sets the tone from the top. We have dedicated programmes to promote our corporate values, business principles and the Code of Conduct within the organisation. Our Chairman's ethical leadership event remains an important event in the ethics calendar for each year. We invite ethics leaders such as Professor Mervyn King or Advocate Thuli Madonsela to address staff and senior leadership on aspects of ethics and accountability. Our combined assurance model allows for various levels of defence.

Looking ahead

The rapidly evolving telecommunications landscape, together with market uncertainty, requires Vodacom to be more agile and innovative. Our Vision 2020 strategy that we embarked on last year is taking shape, with clear progress being made throughout the Company.

Our balance sheet remains strong, further boosted by the acquisition of Safaricom, providing us with sufficient capacity to leverage, and enabling us to execute our growth strategy and realise potential merger and acquisition (M&A) opportunities where these contribute to adding shareholder value.

Over the next three years, we are targeting Group service revenue growth of mid-single digit, Group EBIT growth of mid-to-high single digit, and capital intensity of 12% – 14% of Group revenue. These targets are on average, over the next three years, and are on a normalised basis in constant currency, excluding spectrum purchases and any M&A activity. This assumes broadly stable currencies in each of our markets, as well as stable macro and regulatory environments. These targets exclude the effects of adopting IFRS 15 and IFRS 16.

In closing, I would like to thank the Board for their continued guidance throughout the year.

Till Streichert

Chief Financial Officer
1 June 2018