According to Shameel Joosub, Vodacom Group CEO, A number of encouraging trends were evident in the Vodacom Group’s first-quarter performance, despite the ongoing uncertainty impacting global markets and economies. These include strong service revenue growth in local currency by Vodafone Egypt, Vodacom South Africa’s encouraging data and fixed performance, strong financial services growth and the expansion of M-Pesa’s ecosystem into new service offerings, including merchants.
While the higher cost of living and elevated inflation remains a major factor in most of the markets where we operate, Vodacom continues to deliver on its purpose-led promise of connecting people to a better future, including seeking ways to provide even greater value to customers. For instance, our substantial investments to enhance the network experience for customers across our markets has resulted in a number of accolades. This includes Vodacom South Africa being declared the country’s ‘Most Reliable Network’ and ‘Best In Test’ ahead of competitors by independent benchmarking organisation ‘umlaut’, which is part of Accenture. Earlier this year, ‘umlaut’ ranked Vodafone Egypt, Vodacom Mozambique and Safaricom as ‘Best In Test’, while customers across our markets have rated Vodacom highest in Network Net Promoter Scores.
Vodacom’s purpose-led model is centred around creating a digital society, ensuring inclusion for all and operating with the planet in mind. The breadth of our purpose-led initiatives were detailed in our recently published integrated reporting suite. Among these many initiatives, this quarter we have chosen to showcase the accelerated societal impact of Vodacom Mozambique’s largest purpose-led initiative, Faz Crescer, which promotes digital inclusion in the country. Since its launch in 2018, we have successfully established 66 computer labs in public secondary schools across all provinces of the country. This translates to the provision of
1 300 computers and over 45 000GB of free internet, benefiting more than 215 000 students and teachers so far.
Vodacom has responded to South Africa’s power crisis with increased investment in power resilience and meaningful engagement with stakeholders. We welcome the government’s block exemptions for energy users and suppliers, which enables more efficient procurement and use of backup energy solutions. We were also encouraged by Eskom’s recent publication of a ‘Virtual Wheeling Platform’ paper that builds on our pioneering project with the energy utility to drive private sector investment into new energy generation. We are confident that our virtual wheeling agreement with Eskom will be signed off in the near term and that this will have a positive impact on the country’s power grid and renewable energy mix.
Group revenue increased 36.9% to R35.7 billion, largely boosted by Vodafone Egypt where revenue generated by financial services more than doubled and successful Ramadan and summer campaigns contributed to a 43.2% increase in data traffic. In South Africa, our R4.0 billion investment over four years to mitigate the impacts of loadshedding continues to pay dividends. We now invest more than R11.0 billion a year into our South Africa infrastructure alone, which has resulted in industry leading network availability during elevated levels of power outages and ultimately contributed to the 3.9% increase in service revenue in our largest market.
Revenue from new services – financial and digital services, fixed and IoT – accounts for almost one-fifth of the Group’s total revenue, is well on track to reach our target contribution of 25-30% over the medium-term. Financial services remains a clear strategic priority for the Group and produced a 46.2% increase in revenue to surpass the R3.0 billion mark in a quarter for the first time. This was supported by a strong performance in South Africa and M-Pesa, which remains Africa’s largest mobile money platform by transaction value, and its new services in particular such as loans and merchant services. Combined with financial services in Vodafone Egypt and Safaricom, our mobile money platforms processed US$360.6 billion over the last twelve months, up 5.8%. In South Africa, growth was underpinned by our insurance business with policies up 10.2%. Our super-app, VodaPay, reached 6.7 million downloads and launched free deposits and added ‘send money’ and cash-out services in the quarter.
Supported by our continued focus on financial inclusion and accelerated capital expenditure, revenue in our International operations grew 23.2% to R7.4 billion, underpinned by currency gains and strong growth in M-Pesa and data revenue. A key focus for our International portfolio is digital inclusion through smartphone adoption and data usage, supported by our 23 million data customers. Smartphone penetration across our International operations reached 33.2% in the quarter, highlighting the opportunity for innovative handset financing options to accelerate adoption.
From a mergers and acquisitions perspective, we await regulatory approval for our proposed acquisition of a joint venture stake of up to 40% in MAZIV, which will accelerate fibre reach in South Africa, fostering economic development and helping bridge South Africa’s digital divide. Our recently launched Ethiopian business, Safaricom Ethiopia, has made good progress since its commercial launch in October 2022, already reaching 2.7 million customers and is set to launch M-Pesa services in the second quarter.
Looking ahead, we are fully cognisant of the financial constraints on customers caused by global economic uncertainty and increased inflation. We remain committed to delivering innovations that enhance the value we deliver to customers and helping to alleviate cost of living pressures.
Longer term, we will relentlessly pursue our purpose of connecting people for a better future. I firmly believe that the continued execution of our strategy has the potential to create immense economic value in the markets where we operate, helping to address inequality. By providing access to a smartphone, financial services, healthcare and education to every person across our markets we will fulfil our purpose.
