Read the Vodacom Tanzania Limited HY2019 interim report

Vodacom Tanzania Limited, listed on the Dar es Salaam Stock Exchange under the share code VODA, is a Tanzanian telecommunications company providing voicemail, data and messaging to leased lines, PABX and international connectivity and remote satellite communication services.

Vodacom Tanzania Limited’s service revenue grew 3.9% to TZS497.8 billion resulting from data and M-Pesa whose revenue grew to TZS157.1 billion translating to a 10.9%. M-Pesa revenue accounts for 31.6% of service revenue. The ‘Just 4 You’ platform contributed to the 8.8% growth of the company’s customer base. Revenue grew to TZS501.1 billion by 3.1%. Vodacom’s EBIT grew 10.5% to TZS49.3 billion.

The following are excerpts from the company’s HY`19 report.

Revenue

Service revenue grew 3.9% (7.6%*) to TZS497.8 billion. Strong fundamental growth was delivered through our key strategic drivers – data and M-Pesa – despite a continuation of market pricing pressure seen from the final quarter of the previous financial year. Market pricing pressure continues following the 42.1% reduction in mobile termination rate (MTR) in January 2018. Minutes included within bundles increased by approximately 75% resulting in a decline in the effective price per minute.

Through strong commercial execution we protected our customer base, achieving robust growth in active customers of 8.8%, through our ‘Just 4 You’ platform and improved monetisation of high-value and youth segments. Simultaneously, actions were taken towards improving compliance with customer registration requirements.

These actions together with delivering a superior data user experience and mobile money ecosystem to our customers, as well as obtaining significant traction from our segmented high-value, youth and coastal-focussed bundles, resulted in us maintaining our leading market share of 31.7%.

Revenue grew 3.1% to TZS501.1 billion and includes lower equipment revenue as a result of implementing a new, distributor-based, device sales model aimed at widening the device distribution using third parties.

Mobile voice revenue decreased 4.4% to TZS197.8 billion as we continue to see competitive pressure on effective on-net pricing which drove an increase in minutes of use (MoU) per month by 13.1%. We will continue using ‘Just 4 You’ and segmentation for upselling and price optimisation.

M-Pesa revenue grew 10.9% to TZS157.1 billion. June 2018 marked 10-years of Vodacom M-Pesa in Tanzania. We celebrated with a prize-giving campaign that was integral in achieving the robust 30 day active M-Pesa customer base growth of 10.2% and increasing revenue generating transactions during the period.

Competitive pressure has intensified across mobile financial services, where agent and customer incentives to use competing platforms have increased. This resulted in M-Pesa revenue growth decelerating during the period, particularly when combined with the implementation of the government electronic payment gateway, which effectively reduced fee income from electricity purchases to operators.

Our ‘Lipa kwa M-Pesa’ merchant payment solution continues to gain momentum, with over 8 0002 merchants now actively trading on the platform.

M-Pesa revenue accounts for 31.6% of service revenue, an improvement of 2.0ppts from the prior year.

Mobile data revenue increased 27.1%, achieving revenue of TZS78.8 billion during the period. Our focus on youth and high value customer segments, coupled with partnership-led smartphone campaigns, resulted in a continuation of strong demand for our mobile data services.

Active smartphone users increased 18.1%, reaching a penetration of 29.6% of our customer base. Active data customers reached 8.1 million, up 14.0%. We continued to target specific customer segments and geographies which allow for further improvement to the monetisation of data traffic.

Mobile incoming revenue declined by 23.8% to TZS34.2 billion, adversely impacted by the 42.1% mobile termination rate (MTR) reduction in January 2018 and partially offset by an 16.7% increase in the number of incoming minutes as operators increased all-net bundles in their offers.

Messaging revenue increased by 41.8% to TZS19.0 billion with the number of short message service (SMS) messages transmitted declining by 9.5% to 17.0 billion. This is a result of the introduction of SMS-only bundles in the prior year and a significant improvement in monetising these same bundles during the period.

EBIT

EBIT grew 10.5% to TZS49.3 billion, resulting in an EBIT margin expansion of 0.6ppts to 9.8%. EBIT includes a depreciation and amortisation charge of TZS80.7 billion, representing a decrease of 0.2%.

Operating profit

Operating profit grew 29.7% to TZS49.3 billion. In the prior year, a TZS6.6 billion share-based payment charge was applied, relating to an underwriting arrangement between the Public Investment Corporation (SOC) Ltd, Vodacom Tanzania and Vodacom Group Limited, as part of the initial public offering of 25% of Vodacom Tanzania’s ordinary shares.

 

Outlook

We expect that the momentum from the resilience of our strategy in the first six months will continue into the second half of the year. In particular, our cost optimisation programme combined with growth in data and M-Pesa revenue positions the business well in spite of intensified pricing pressures.

From an M-Pesa perspective, we continue to establish new partnerships to further enhance the mobile money ecosystem.

Having acquired 700 MHz spectrum in June 2018, this allows us to prioritise investments over the short-term to extend our leadership position in data user experience to improve data monetisation across strategically significant regions. Additionally, we will continue to drive further increases in smartphone penetration to help bridge the digital divide through further partnership-led, low-cost smartphone campaigns.

Our segmented marketing propositions allow us to better protect our share of the market in key segments and we are encouraged by the significant traction gained from our high-value, youth and coastal-focussed segments in the first half. Momentum in this area is contingent, in the short-term, on the outcomes from proactive measures to further enhance compliance with customer registration requirements.

Assuming a stable currency, regulatory and macroeconomic environment, our guidance remains unchanged. We continue to target mid-single-digit service revenue growth, with broadly stable capital intensity in the second half of the financial year.