Rolling blackouts, higher inflation weigh on Vodacom’s earnings

Vodacom, a leading African telecommunications company, recently reported a 6.4% drop in headline earnings per share for the year ended March. The company attributed this decline to a combination of factors, including the power crisis in South Africa, startup losses from its Ethiopian venture, and higher inflation across its markets. In a conversation with CNBC Africa, Shameel Joosub, the CEO of Vodacom Group, shed light on the challenges the company is facing and its outlook for the future. The power cuts in South Africa have been a major thorn in Vodacom's side, impacting its operations and bottom line. Joosub highlighted the significant costs incurred due to the power crisis, with the company having spent billions on batteries, generators, and rectifiers in the last four years. These expenses have not only strained the company financially but have also diverted funds that could have otherwise been directed towards expanding infrastructure, such as the rollout of 5G technology. Despite these challenges, Vodacom remains committed to its investment plans in the region, with a focus on enhancing network resilience and customer experience. In Egypt, Vodacom has seen promising growth opportunities, with the market expanding by 21% in the past year. The company has upgraded its revenue and profit targets for Egypt over the medium term, citing strong growth potential in the market. Joosub also touched on the recent developments in Ethiopia, where Safaricom, in which Vodacom holds a strategic investment, was awarded a mobile money license. While entering new markets like Ethiopia comes with short-term costs, Joosub emphasized the long-term growth prospects and strategic significance of such investments for Vodacom. Looking ahead, Vodacom's international markets are poised for continued growth, with the company aiming for double-digit growth next year. Despite facing headwinds such as devaluation issues, Vodacom remains optimistic about achieving single-digit EBITDA growth and maintaining its focus on delivering value to its stakeholders. The company's strategic investments in markets like Egypt and Ethiopia are seen as key drivers of future growth and profitability, positioning Vodacom for success in the rapidly evolving telecom landscape.