VODACOM DISAPPOINTS AS ITS POST-IPO PROFITS PLUNGE IN SIX MONTHS

A Vodacom retail store. The telecommunications firm launched its IPO for its Tanzanian subsidiary in March.

Vodacom Tanzania’s net profit has plunged by almost half in the six months ending September, due to charges paid to an underwriter during its initial public offering.

Vodacom, which is the first telecommunications company to list on the Dar es Salaam Stock Exchange, made a net profit of $8.5 million (Tsh18.89 billion) down from $14.7 million (Tsh32.68 billion) registered in the same period last year.

In a financial statement released two weeks ago, the firm said the drop in profit was due to “greater regulatory uncertainty” and “macroeconomic pressures” that led to the drop in earnings in the second half of the year.

“Increases to regulatory levies, enhancements made to our customer registration processes and mandatory capital expenditure as part of state-run projects placed greater pressure on margins,” said Vodacom in its interim results for the six months ended September.

Vodacom shares traded at $0.38 (Tsh850) last week, an increase from $0.35 (Tsh770) the previous week.

Fine

In April, the Tanzania Communications Regulatory Authority issued non-compliance orders to operators who failed to submit to a SIM card-registration audit conducted in December 2016.

Vodacom Tanzania was fined $0.85 million (Tsh1.9 billion) in July 2017 when the regulator issued the fines associated with these non-compliance orders.

The telco registered an increase in revenue by 6.4 per cent to $215.6 million (Tsh479.2 billion) from sales made from replacing unregistered devices, but still posted a drop in operating profit of $9 million from $26.1 million (Tsh58 billion) to $17.1 million (Tsh38 billion).

The drop was partly due to a $2.97 million (Tsh6.6 billion) paid to the underwriter to the Public Investment Corporation as part of the initial public offering of Vodacom Tanzania’s ordinary shares.

In July, Vodacom placed 560 million shares at $0.38 (Tsh850) each in Tanzania’s biggest IPO, raising Tsh476 billion ($213 million).

The IPO was part of government-imposed requirement for all telcos to list at least 25 per cent of their shares locally.

The Tanzania government projected that the mandatory listing of telecom companies will improve transparency and offer the public a share in the industry’s profits. Telecommunications is one of the fastest-growing sectors in East Africa.

Improve data usage

The other two major mobile operators in Tanzania, Millicom subsidiary Tigo and a local arm of India’s Bharti Airtel, have also submitted prospectuses, but their IPOs are yet to be approved.

The number of mobile phone subscribers in Tanzania rose 0.9 per cent last year to 40.17 million, driven by the launch of cheaper mobile phones in the country, which has a population of around 50 million.

Vodacom’s customer base during the period grew by 4.1 per cent to reach 12.9 million subscribers.

The profit decline pushed down earnings per share sunk 46.7 per cent to 10.36 from 19.45.

The company approved a gross final dividend of $0.005 (Tsh12.74) per share, payable from reserves. The dividend is equivalent to 60 per cent of net profit after tax.

“If it was not for the share-based payment charges to the underwriter, as well as credit note in the prior year, net profit after tax would have grown by 27.1 per cent,” said Vodacom.

The company is upbeat on the future outlook and is banking on their ‘Lipa kwa Mpesa’, which is a merchant payment platform. The company’s revenue from Mpesa increased by 17.2 per cent to $63.72 million (Tsh141.6 billion).

The Lipa kwa Mpesa” merchant base transacted over Tsh100 billion ($45 million) during the period and grew to over 3,000 merchants.

“The acceleration in service revenue growth has been facilitated by our strategy of delivering a superior data user experience and extensive Mpesa ecosystem which resulted in the continued expansion of our active customer base,” said Ian Ferrao, the Vodacom Plc. managing director.

“Improved data monetisation remains a core objective as we continue to drive up the number of smartphones on our network and improve data usage per user,” Mr Ferrao said.

Mobile voice revenue on the other hand dropped from $94.5 million (Tsh210 billion) to $93.15 million (Tsh207 billion).

Revenue from data grew by 21 per cent to $27.9 million (Tsh62 billion) driven by smart phone adoption and 600,000 new active data customers.

The East African