Vodacom, SA’s biggest mobile phone operator, says it is pleased with the take-up of its new fintech offerings as revenue from financial services rose above R2bn for the first time in its third-quarter to end-December.
Investors, however, appear to have been less impressed with the division’s performance compared with rival MTN. Its shares closed 1.26% lower at R144.98 on Tuesday, while MTN eased 0.17% to R191.80. The JSE all share rose 0.79% to 74,889 points.
Group revenue grew 6.4% to R26.7bn in the three months to end-December, Vodacom said on Tuesday, with financial services revenue growing 12.5%, and its new services contributing 17.7% of group service revenue.
Vodacom is diversifying is business away from basic telecommunications, where margins are under pressure from stiffer competition and greater regulatory scrutiny from the Competition Commission. The group is targeting new services accounting for 25%-30% of service revenue by its 2024 year.
Vodacom’s financial services strategy has been driven by fintech business M-Pesa outside SA, focusing on mobile payments and lending. It has also launched its Vodapay app as a one-stop platform for individuals to buy anything from electricity to insurance.
Vodapay was launched in October and the group said it had exceeded expectations, attracted 1.4-million downloads and recorded 1-million registered users by the end of December.
Vodacom’s M-Pesa platform, including Safaricom, continues to scale up with transaction values rising 16.1% to exceed R430bn a month, the group said.
MTN reported fintech growth in Nigeria on Monday and the shares of Africa’s biggest mobile operator shot up by a tenth. Asked about the lacklustre response to Vodacom’s fintech performance, David Lerche, a senior analyst at Sanlam Private Wealth, said the market was less excited because Vodacom is more exposed to SA, “where the fintech opportunity is less clear”.
“In SA we have high banking penetration and thus the need for financial services is already met by our very strong financial system. This may change with Vodacom’s imminent purchase of parent Vodafone’s Egyptian business, where the fintech opportunity appears attractive,” he said.
Vodacom’s international revenue from financial services also outperformed SA, growing 12.9% to R1.32bn on a reported basis, while local revenue from this business line grew 11.8% to R692m.
In SA, the company grew its customer base by 3.3% year on year to 45.77-million, while its international customer base grew 6.9% to 42.12-million.
Shaun Murison, a senior analyst at IG Markets, said Vodacom's quarterly results were “slightly below consensus although shows a positive recovery from what was a soft preceding quarter”.
He noted that the group’s SA operations remain the biggest source of operating profit, accounting for more than three-quarters of the number.
“Local prepaid revenue was stagnant despite an increase in prepaid subscribers. The near 8% increase in contract-based revenue was solid in what is a saturated market,” Murison said.
Vodacom CEO Shameel Joosub said in a statement: “The third quarter of our financial year coincided with a fourth wave of milder Covid-19 infections across most of the world but was largely shaped by economies beginning to recover from the impact of the pandemic.”
Vodacom remained committed to focusing on economic recovery in its markets, Joosub added. The group is pursuing a six-point plan, which includes expanding network coverage and resilience, accelerating support to governments as well as enhancing digital accessibility and adoption.
Update: February 1 2022
This story has been updated with Vodacom's share price and comment from analysts
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