South Africas Vodacom targets a quarter of group revenue from digital, financial services in medium term – Reuters.com

A branch South African mobile communications provider Vodacom in Cape Town is shown in this picture taken November 10, 2015. REUTERS/Mike Hutchings

JOHANNESBURG, May 16 (Reuters) – South Africa’s Vodacom Group (VODJ.J) expects new digital and financial services to generate over a quarter of group service revenue in the medium term, its chief executive said on Monday as the telecom operator reported a rise in full year operating profit.

Vodacom, like its peer MTN Group (MTNJ.J), has been transforming its business from just providing telecom services to building a technology company that now enables its 129.6 million customers to also lend money, make payments, shop online and control appliances at home using smartphones.

It is betting on millions of Africans that still don’t have access to financial services and on the continued growth of smartphone adoption and internet penetration on the continent.

Vodacom’s aggressive focus on new services, which include digital and financial services, fixed broadband and internet of things (IoT) – the concept of connecting household devices to the internet – supported its normalised group service revenue growth of 4.6% to 79.9 billion rand ($4.91 billion) in the year ended March 31.

Revenue from financial services, the largest component of sales of new services, jumped 14.4% to 7.6 billion rand. That growth was driven by strong adoption of Vodacom’s South African “super-app”, VodaPay – which allows users to pay for bills and shop from various online stores in the app using their smartphones – and by continued growth of its M-Pesa mobile money service.

Since its launch last October, VodaPay has attracted 2.2 million downloads and 1.6 million registered users, Vodacom Group Chief Executive Shameel Joosub said in a statement.

IoT was up 32.1%, supported by products in agriculture and smart infrastructure. On aggregate, these new services amounted to 14.3 billion rand and contributed 17.9% to group service revenue, he added. The group is targeting a contribution of 25%-30%.

“Each year we see a step up of the contribution of these new services and part of that will be underpinned by the launch of e-commerce through the super app and capabilities of VodaPay in all our markets,” Joosub told a media conference.

Vodacom is finalising asset acquisitions of Vodafone Egypt from parent company Vodafone (VOD.L) and buying fibre assets in South Africa.

Through a consortium led by Kenyan telecoms operator Safaricom (SCOM.NR), the parties including Vodacom plan to launch in Ethiopia by this year after a delay due to a conflict in northern Ethiopia that broke out in 2020. Vodacom partly owns Safaricom.

“We are quite encouraged by the fact that things are getting better on the ceasefire and so on. We’re busy on the rollouts at the moment and we’ll launch later this year,” Joosub said.

Egypt and Ethiopia, each with populations of over 100 million people, “provide transformational opportunities for financial services,” he added.

Vodacom reported a normalised operating profit of 28.23 billion rand for the year, up from 27.65 billion rand in 2021, while headline earnings per share rose by 3.4%.

($1 = 16.2022 rand)

Reporting by Nqobile Dludla; Editing by Tom Hogue, Sherry Jacob-Phillips and Susan Fenton

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