Vodacom Tanzania – Q1 2023 total revenue down 3.8% to TZS245.8 bn due to pressure on service revenue

By Published On: July 22nd, 2022Categories: Corporate announcement, Earnings
Vodacom Tanzania Limited 2023 Interim Results For The First Quarter

Vodacom Tanzania Limited (VODA.tz) Q1 2023 Interim Report

Acting Managing Director’s review

I am pleased to present Vodacom Tanzania’s first quarterly report that adopts the enhanced reporting requirements of section 53 (1), of the Dar es Salaam Stock Exchange Public Limited Company Rules, 2022 the ‘DSE rules’. The supplementary disclosure of quarterly financial performance builds on our existing quarterly trading updates, which had already provided timely transparency on our key performance indicators (KPIs) and other non-financial business updates.

We commenced the financial year by continuing with an important step in delivering on our purpose and social contract. In collaboration with the Government of Tanzania and the Vodafone Foundation, in April 2022, we officially launched our M-Mama program. The program provides emergency transport for expectant mothers and newly born infants in rural Tanzania, in an effort to reduce maternal mortality rates. This follows a successful pilot phase that started in year 2013 in the lake regions of Mwanza and Shinyanga, serving over 12 000 beneficiaries. The current phase has been extended to cover 14 regions, with more than half of the Tanzanian population. We are excited about this journey, to continue serving the community beyond connectivity and financial services. It is our commitment to support the wellbeing of Tanzanians by leveraging our technological capabilities and partnerships. We are encouraged by the government’s commitment to this initiative, as stressed by the President of United Republic of Tanzania, H.E Samia Suluhu Hassan, whom we were honoured to host, as a guest of honour in the launch ceremony.

In the quarter we remained focused on commercial execution by targeting customer base recovery and growth, through both on-the-ground and segmented below-the-line initiatives. We invested in driving customer acquisition and retention, as well as increasing the number of days a customer is active on our network. Further, our multi-product strategy called the ‘system of advantage’, which leverages machine learning capabilities, continued to play a pivotal role in differentiating our customer proposition. I am pleased that despite intense market competition, we grew our customer base by 1.5% to 15.6 million, while also continuing to drive up smartphone penetration by 3pp. Our M-Pesa customer base also recovered to 7.4m, a 9.0% quarter-on-quarter growth. This improvement was supported by our new service offerings and around 0.4 million customers re-activating their M-Pesa accounts to collect interest payments.

From financial performance point of view, total revenue was TZS245.8 billion, 3.8% lower (underlying growth of 7.7%*) as a result of pressure on service revenue. Service Revenue was TZS240.9 billion, a decline of 4.3% (up 7.3%*). The growth in data, digital & VAS and fixed revenue was offset by the under-performance in M-Pesa and voice revenue, that led to 9.2% ARPU dilution. The underlying service revenue growth of 7.3%* is a reflection of our successful commercial execution.

Total expenses2 were TZS175.1 billion, 3.6% higher (11.5%* higher). Direct expenses were TZS81.5 billion, up 3.5%, mainly driven by increased investment in customer acquisition and retention including devices, commissions and interconnect expenses aimed at expanding our customer reach. Within operating expenses, staff expenses declined 1.7% as a result of our cost transformation initiatives. These initiatives offset annual salary adjustments and expenses increase due to higher headcount. Publicity expenses declined 12.4%, a realisation from efficient cost transformation initiatives. Other operating expenses grew 6.8%, mainly driven by the additional investment in the network, contractual prices escalations and higher fuel prices, partly offset by savings realised from our efficient cost containment measures.

During the quarter we generated operating profit of TZS8.1 billion, 59.5% lower (up 19.4%*), primarily impacted by lower revenue due to the levy on mobile money transfer and withdrawals transactions and higher expenses.The cost increases were partially offset by 6.6% lower depreciation and amortisation, mainly due to review of useful lives of assets in line with our accounting policy to evaluate technology relevance and existing assets’ conditions.

Income tax expense of TZS2.9 billion was 74.4% lower year-on-year, mainly due to lower profitability in M-Pesa Limited.

Looking forward, we are increasingly encouraged by the government’s readiness to review its laws and policies, for the benefit of the country’s development and citizens’ wellbeing. The government’s decision to implement a 43% reduction on the levy on mobile money transfer and withdrawals transactions, effective from 1 July 2022, is expected to provide much needed reprieve to the industry and help to revive efforts in driving financial inclusion through mobile financial services – particularly M-Pesa. The proposed reduction marks a total reduction of 60% on the levies since its implementation in July 2021. Separately, and also positively, the government through the Bank of Tanzania (BoT) extended international money transfer destinations beyond East Africa to include the Southern Africa Development Community (SADC) member countries. Leveraging our strategic M-Pesa Africa hub, we will support our customers with innovative and cost effective solutions for their local and international remittance needs. More broadly, we are thankful to the government for opening up more opportunities for us to expand our services, and we are committed to continue engaging with the government on all relevant matters. This is our responsibility not only for addressing our business objectives, but also in delivering on our social contract and purpose.

We will continue to monitor the impacts of the Russia-Ukraine war, and proactively undertake all necessary actions in minimizing the potential impact to the business from this global turmoil, which has so far impacted global food and fuel prices, as well as destabilisation of some major currencies.