Vodacom's milestone BEE transaction knocks shareholder earnings slightly

Vodacom CEO Shameel Joosub. (Pic: Gallo Images)
Vodacom CEO Shameel Joosub. (Pic: Gallo Images)

Vodacom's shareholder earnings dipped 13.5% for the half-year ended September 30, 2018. This is on the back of a BEE transaction which was concluded during the period.

The mobile operator on Monday released its interim results. It reflected a slight dip in headline earnings per share (HEPS) from 445c reported in 2017, to 385c.

In a note to shareholders CEO Shameel Joosub explained that the costs associated with a BEE transaction concluded during the period had a once-off impact on the HEPS. This effect was partially offset by contributions from Safaricom, acquired in the prior year.

The BEE transaction is considered to be one of two milestones of the group.

"In September, we concluded our second BEE transaction under the YeboYethu umbrella to replace the highly successful R7.5bn deal launched in 2008. Valued at R16.4bn, the new scheme is the biggest ever in the telecommunications industry in South Africa and makes YeboYethu our third largest shareholder," Joosub said.

"As expected, the costs associated with this transaction had a once-off impact on headline earnings per share.

"Excluding the charges relating to the BEE transaction and contribution from Safaricom, HEPS rose 6.0%," he explained.

Vodacom issued an additional 114.5 million shares to facilitate the new BEE structure and increased the interim dividend to 395c per share. The dividend is up 1.3% from the 390c interim dividend of 2017.

The second milestone relates to Vodacom Lesotho becoming the first company to commercially launch 5G on the African continent. "This makes Vodacom Lesotho among the first in the world to lay claim to this innovation, paving the way for our other operations to follow suit once we secure the requisite spectrum," said Joosub.

Vodacom's stake in Safaricom networks (Kenya) also yielded positive results for the group, having contributed to the 5.8% growth of the group's service revenue of R36.8bn. Overall group revenue increased 5.6% to R44.4bn. Safaricom contributed R1.4bn to the group's net profit of R6.7bn. Net profit grew by a mere 0.7%.

Operating profit of R11.1bn grew by 0.8%.

During the period Vodacom invested R4bn in South Africa, overall capital expenditure came to R5.3bn. Capital was mainly used to expand coverage and improve the quality of networks.

Vodacom's mobile money platform M-Pesa, operational internationally, yielded a 25.2% increase in revenue to R14bn.

"Looking ahead, the relative economic and currency stability in most of our international markets is pleasing and we will continue to invest heavily in our networks, artificial intelligence and Big Data analytics to drive financial inclusion, further enhance customer experience and progress Vodacom's digital telco strategy," said Joosub.

Of the roaming partnership with Telkom, Joosub said it is a "long-term mutually beneficial agreement".

Vodacom, although pleased with the licencing of 4G spectrum in SA, will continue to engage with regulators and other stakeholders on policy matters, Joosub said.

Vodacom's shares which opened at R129, dipped 1.12% to trade around R128.86 by 09:20.

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