Vodacom Tanzania – FY22 service revenue up 9.8%, buoyed by a strong performance in data

By Published On: May 17th, 2022Categories: Corporate announcement, Earnings

Vodacom Tanzania Limited (VODA.tz) 2022 Abridged Report

Sitholizwe Mdlalose, Managing Director, Vodacom Tanzania PLC, commented:

In April 2022 we extended the reach of our M-Mama program, which provides emergency transportation for pregnant women to healthcare centres in rural areas, to cover half the population. The program partners with the government in an effort to reduce maternal deaths and builds on the contribution we have already made in the Lake region areas of Mwanza and Shinyanga.

In the financial year 2022, we accelerated the delivery of our purpose-led strategy, building on critical programs to support the government, businesses and communities during the peak of the COVID-19 pandemic, and by advancing broader initiatives to reinforce our social contract and sustain our responsible corporate citizenship status.

We are pleased with the impact of our rural connectivity program, which already spans 1 6801 sites, including 283 sites built in collaboration with the government through the Universal Communications Service Access Fund to widen connectivity for the deep rural communities. Rural connectivity is crucial in bridging the digital divide by providing access to affordable communications while also supporting execution of our social contract programs focused on education, health, environment and agriculture.

We also extended our purpose-led impact beyond our core connectivity business by leveraging our digital ecosystem. Our M-Kulima initiative provides a cashless payment platform to more than 140 000 registered farmers, with additional benefits on speed of payments and security to the parties involved. Our impactful M-Mama program has assisted over 12 000 expectant mothers in the Lake region areas of Mwanza and Shinyanga since initiation in 2013. In April, we officially launched the program country-wide. The program will now operate in 14 regions.From a financial performance perspective, our service revenue momentum was stalled by the impact of the new levies imposed on mobile money services in July 2021. Having delivered 12.0% growth in the first quarter, our full year service revenue declined by 1.0%.

Adjusting for an estimated TZS103.8 billion impact from the levies, our underlying service revenue grew 9.8%* in the year, underpinned by strong performance in data supported by growing demand for digital services following our continued investment in the data network. Despite the pressure on reported service revenue, we reported operating profit of TZS64.4 billion, a 30.1% (149.5%*) improvement year on year, accelerated by our cost containment measures. Looking ahead, we continue to engage with government on a further levy reduction. We are grateful for the 30% reduction announced in September 2021, however it still represents material increase in end user charges. We believe by unlocking the growth potential in M-Pesa we can meaningfully address financial inclusion.

Leveraging our relationship with Vodacom Group and M-Pesa Africa, we continue to expand our product portfolio and implement the best practices to sustain our M-Pesa customer market leadership currently at 39.6%1 . This product portfolio and strong commercial execution helped us in acquiring new customers to mitigate a proportion of the 1.3 million M-Pesa customers that relinquished services immediately following the introduction of the levy. Additionally, products such as financial services, merchant payments and international money transfer (IMT) are increasingly becoming core service offers on M-Pesa.

Our lending product, Songesha, continued to perform well in facilitating seamless completion of customer transactions, with a 10.9% growth in value of overdrafts issued and a 6.8% increase in Songesha customers. The value of Songesha overdraft issued to agents scaled by over 120%, with an average overdraft of TZS230 000 per beneficiary per month.

We also focused on providing our customers with an end-to-end payment solution through “Lipa kwa M-Pesa”, a point-of-sale payment mechanism. In the year, we have increased active merchants to over 40 000 with more than TZS1.7 trillion in transaction value processed, an increase of over 25%. Our IMT service also continued to play an important role in supporting financial inclusion and funds inflow into our M-Pesa ecosystem with over 40% growth in transaction value to more than TZS850 billion.

Despite financial performance headwinds, we remain positive on the potential of the market and continued to invest in the network. Capital expenditure of TZS174.0 billion, was up 42.1% and directed towards improving the quality of our network by accelerating 4G sites roll-out and upgrades and enhancing our IT infrastructure. I am particularly pleased that our sustained capital investment was supported by the availability of more affordable devices due to government’s decision to exempt Value Added Tax on imported smartphones.

This investment supported double-digit growth in data revenue of 18.9%. Further, smartphone penetration increased to 54.2% of data customers, up 13.5pp year-on-year, and contributed to 22.3% growth in data usage to 1.7 gigabytes per customer per month. We maintained our leadership in headline Net Promoter Score with an 18-point gap to the next best competitor, and customer market share at 29.4%1 despite the impact from barring 568 000 non-biometrically registered customers in the second half of the year in compliance with registration regulations.

I am incredibly proud of what we have achieved, and what we are working on, to drive the business through its commercial recovery in order to deliver and protect shareholders’ value, our workforce wellbeing and safety–while contributing significantly to Tanzania’s economic growth and improve society’s living standard. This year, we celebrated a landmark 10th fatality free year at Vodacom Tanzania, demonstrating our success and commitment in establishing a safe working environment to both our employees and suppliers.

Looking ahead, we are encouraged by the willingness of government to engage on industry reforms that may pave the way for improving business performance and encourage further investments by addressing both shareholders’ expectations and delivery of our purpose. Against a backdrop of uncertain global macro conditions, we remain focused on delivering diversified and differentiated offerings to our customers. We will continue to deliver on sustainable cost containment initiatives and proactive measures to drive top line recovery to support profitability of the company.

In closing, I would like to expres