Vodacom reinstates targets as it eyes spectrum auction

Vodacom Group reinstated growth targets based on an expected economic recovery from the Covid-19 crisis in 2022, and said it has the financial strength to take part in a long-awaited auction of broadband spectrum in South Africa.

The country’s largest mobile phone company now sees mid-single-digit growth in both service revenue and operating profit over the next three years, according to a statement on Monday. The move follows a decision by the company to scrap forecasts in the early phase of the pandemic, in response to the uncertain environment.

South Africa’s telecommunications industry has held up better than some during the pandemic, with soaring household data bills helping to offset the impact of slower economic activity. In Vodacom’s home market, data usage surged 86% in the six months to September, and the company boosted investment in network infrastructure over the period to R6.6-billion.

The shares traded 1.4% higher as of 9.07am in Johannesburg, extending a climb for the year to 12%.

Next up for the company, which is majority owned by the UK’s Vodafone Group, is to prepare for South Africa’s sale of more than R8-billion of spectrum, pledged in early October as part of a range of government measures to revive the economy. Vodacom and MTN Group, its chief rival, have long called for the move, but political disputes over how it should proceed have thwarted the process.

“We have a strong balance sheet, and we have adequate headroom to take on more debt at favourable rates to take part in a spectrum auction,” Vodacom CEO Shameel Joosub said on a call with reporters.

Trouble in Ethiopia

Vodacom, which has international operations in Tanzania, Mozambique and the Democratic Republic of Congo, is among carriers planning to bid for new telecoms licences in Ethiopia, though an ongoing military conflict in the Horn of Africa nation is giving the carrier cause for concern.

“We are monitoring the situation and we will make a call closer to the time,” the CEO said. Vodacom is planning to take part alongside Vodafone and Kenya’s Safaricom, in which it owns a minority stake.

Fighting erupted between Ethiopia’s central government and the northern Tigray region in early November, leading to the deaths of hundreds of people to date. The battle won’t distract the government from implementing reforms, including the telecoms privatisation, finance minister Eyob Tekalign said last week.

Vodacom reported first-half gains in revenue, earnings and customer numbers, and will pay an interim dividend of R4.15, up 9% year-on-year.  — (c) 2020 Bloomberg LP