Vodacom Boosts Growth Forecasts on Rising Network Investment

  • Service revenue, Ebitda three-year targets raised on data
  • Growth plan excludes possible award of spectrum, CEO says

Vodacom Group Ltd., Africa’s largest wireless operator by market value, raised three-year targets for revenue and earnings as rising investment in its network delivers growth in South Africa and international markets.

Service revenue will probably rise by an average percentage in the low-to-mid single digits over the next three years, while earnings before interest, taxes, depreciation and amortization is seen rising by mid-to-high single digits, the Johannesburg-based unit of Vodafone Group Plc said in a statement on Monday. The company had previously forecast low single-digit growth for service revenue and mid-single digits for Ebitda.

The raised targets don’t include any acquisition or award of additional spectrum Vodacom needs to roll out 4G and 5G networks across South Africa, the company’s biggest market, according to Chief Executive Officer Shameel Joosub.

“The guidance is done with a view that spectrum won’t be allocated in the next two years,” Joosub said in an interview on Monday. “If we do get access to additional spectrum we could switch on 4G networks almost overnight.”

Neotel Collapse

Vodacom, which earlier this month overtook cross-town rival MTN Group Ltd. as the continent’s biggest phone company by market value, is investing in data services as smartphone usage rises across markets including South Africa, Tanzania and the Democratic Republic of Congo. The company abandoned a pursuit of Neotel Pty Ltd. in March after almost two years of regulatory battles and legal opposition to the deal by competitors, an acquisition that would have boosted its Internet offering.

“We have paid our school fees on the Neotel deal,” Joosub said on a conference call with journalists. The company, about 65 percent owned by Newbury, England-based Vodafone, remains interested in an acquisition of unprofitable state-owned Broadband Infraco if the government puts the company up for sale, the CEO said.

Missed Estimates

Earnings per share excluding one-time items rose 2.7 percent to 8.83 rand in the year through March, the Johannesburg-based company said. That compares with a 9.13 rand average estimate by analysts surveyed by Bloomberg. Sales rose 8 percent to 80 billion rand ($5.2 billion).

The shares declined 2.4 percent to 160.03 rand as of 4:01 p.m in Johannesburg, valuing the company at 243 billion rand. The stock has gained 5 percent this year. MTN gained 0.3 percent, ending a three-day run of declines.

The earnings growth was affected by the re-measurement of foreign-currency denominated intergroup loans and one-off charges related to black economic empowerment, a way South Africa redistributes wealth to benefit those discriminated against during apartheid.

“Vodacom is constantly looking at how it can increase its empowerment shareholding,” Joosub said.

South Africa’s Public Investment Corp., which bought 14 percent of Vodacom from the government for about 25 billion rand last year, has been in talks with black investors about selling part of the stake, the money manager said last month.

A sale of some of the PIC’s shares to black investors would help boost the mobile-phone company’s empowerment shareholding from the current level of 19 percent. That would increase the company’s chances of completing a deal for new spectrum, Joosub said.

Vodacom will pay a final dividend of 4 rand a share, taking the total payout to 7.95 rand. That compares with 7.75 rand in the previous year.

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