Vodafone Shifts Resources to High-Growth Markets in Africa

Vodafone Group Plc (VOD), the second- largest mobile service provider, is boosting investments in its African businesses as higher growth rates promise relief from stagnant earnings in Europe.

Vodafone’s biggest African partner and South Africa’s largest wireless carrier, Vodacom Group Ltd. (VOD), today said full- year earnings per share rose at least 25 percent as the company expands into new countries on the continent.

Vodafone is relying increasingly on Africa as profit from its 65 percent stake in Vodacom surpassed that from the Newbury, U.K.-based company’s British unit in 2010 and outpaced the Spanish division the following year.

“Without a doubt we have put more money into the southern African markets where we have been seeing revenue growth rates of around 20 percent per annum,” Vodafone Chief Financial Officer Andy Halford said in an interview from his London office yesterday. “In those areas where there is an opportunity to take market share and to really substantially grow the business, we will absolutely shift resources to those markets.”

Africa will be the mobile-phone industry’s fastest-growing region by subscribers over the next five years as companies build advanced networks and customers switch to broadband, according to consultant AT Kearney Inc.

Photographer: Nadine Hutton/Bloomberg

Vodafone is relying increasingly on Africa as profit from its 65 percent stake in Vodacom surpassed that from the Newbury, U.K.-based company’s British unit in 2010 and outpaced the Spanish division the following year. Close

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Photographer: Nadine Hutton/Bloomberg

Vodafone is relying increasingly on Africa as profit from its 65 percent stake in Vodacom surpassed that from the Newbury, U.K.-based company’s British unit in 2010 and outpaced the Spanish division the following year.

While Europe has more mobile-phone accounts than people, there’s ample room for handset ownership in Africa to grow from what was about 73 percent of the population last year to 85 percent in 2015, reaching 900 million users, Kearney predicts.

Vodacom Expansion

Vodacom is accelerating spending in sub-Saharan African countries such as Mozambique, Tanzania and Lesotho, Romeo Kumalo, chief operation officer for its international business, said in an interview on April 18 at the company’s headquarters in Johannesburg.

“Vodafone has been clear with us that where there’s an opportunity, they’ll give us the capital expenditure,” Kumalo said. For example, demand from mining companies in northern Mozambique and a lack of capacity in Tanzania has spurred Vodacom to build up local networks and invest in fiber, he said.

Capital spending in Africa and the Middle East increased to 723 million pounds in the fiscal year ended March 2012, up from 572 million pounds the previous year. Meanwhile Europe, Vodafone’s biggest market, saw capital expenditure shrink to 3.6 billion pounds from 3.7 billion pounds. The company will report results for the fiscal year ended March 2013 next month.

Low Bills

Vodacom also represented the second-largest pool of subscribers for Vodafone at the end of last fiscal year with 57.3 million customers. India leads with 150.5 million users. Vodafone Germany had 36.5 million while Vodafone’s home country trails with 19.2 million.

Still, emerging countries with the biggest growth rates, subscriber numbers and voice minutes are also often some of the poorest and average customer bills are lower than those in Europe. Clients in the Netherlands, U.K. and Spain pay the most per month, averaging between 25.89 pounds and 19.07 pounds, according to data for fiscal 2012.

Vodacom users average 47 million minutes of talk time per year and pay 7.77 pounds a month. Indian subscribers talk the most at 530.7 million minutes -- making up more than half of Vodafone’s total voice usage -- and pay the least at 2.26 pounds.

In addition to Vodacom’s customers in South Africa, the Democratic Republic of Congo, Mozambique, Tanzania and Lesotho, Vodafone serves users in Ghana, Kenya and Egypt. It has a 70 percent stake in Vodafone Ghana, a 40 percent holding in Safaricom Ltd. (SAFCOM) in Kenya, and co-owns an Egyptian operator with fixed-line monopoly Telecom Egypt.

To contact the reporters on this story: Amy Thomson in London at athomson6@bloomberg.net; Christopher Spillane in London at cspillane3@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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