Vodacom (VOD) is South Africa's largest provider of airtime and data services for mobile phones. It operates as a subsidiary of the international telecom company Vodafone. Its main competitors include MTN, Cell-C, and Telkom. The mobile industry has faced continuous pressure from declining voice revenue, partially offset by a sharp increase in data usage.
One disadvantage of investing in Vodacom is its foreign ownership. This was highlighted when its share price dropped 7% in two days due to concerns that Vodafone might be forced to sell its non-European subsidiaries. Vodacom has operations in Mozambique, Tanzania, the DRC, and Lesotho. The company is also looking to expand into Ethiopia, Africa’s fastest-growing economy, with a population of 105 million.
On 2nd December 2019, the Competition Commission ruled that Vodacom and MTN must cut their interconnect fees by between 30% and 50%. Since interconnect fees represent a significant portion of Vodacom's revenue, this led to a 5% drop in its share price. To diversify its revenue streams, Vodacom is launching a "super-app" in partnership with Jack Ma’s Alipay to boost non-voice income. Additionally, the company has spent R4 billion to mitigate the impact of loadshedding.
We believe that while Vodacom has strong fundamentals, it may take some time for the share to regain its former highs.
In its results for the six months to 30th September 2024, Vodacom reported a 1% increase in revenue, but headline earnings per share (HEPS) declined by 19.4%. Financial services revenue grew by 7.8%, contributing 11.4% to group service revenue. The company had 206 million customers and provided financial services to 83 million. Vodacom stated, "While our bottom line was impacted by various one-offs, I am confident that we are poised for a stronger second half performance."
In a trading update for the three months to 31st December 2024, Vodacom reported revenue up 1.6%, with service revenue rising by 11.6%. The company noted, "...the quarter was positively impacted by accelerated growth in South Africa's prepaid market, in addition to another stellar performance in Egypt and Tanzania, while network operators in Mozambique, including Vodacom, have been hampered by post-election tensions since October 2024."
Technically, the share fell from its high of 16,214 cents on 1st April 2022. We previously advised waiting for a clear break above its downward trendline, which occurred on 25th July 2024 at 9,836 cents. Since then, it has climbed to 11,611 cents, although it dipped slightly after the latest results.
At current levels, Vodacom appears relatively cheap, offering a dividend yield (DY) of around 3.93%. However, it operates in a dynamic environment where technology advancements and regulatory shifts present ongoing risks. While Vodacom remains a solid dividend payer and a stable telecom business, investors should be aware of potential regulatory and industry changes that could impact future performance.
One disadvantage of investing in Vodacom is its foreign ownership. This was highlighted when its share price dropped 7% in two days due to concerns that Vodafone might be forced to sell its non-European subsidiaries. Vodacom has operations in Mozambique, Tanzania, the DRC, and Lesotho. The company is also looking to expand into Ethiopia, Africa’s fastest-growing economy, with a population of 105 million.
On 2nd December 2019, the Competition Commission ruled that Vodacom and MTN must cut their interconnect fees by between 30% and 50%. Since interconnect fees represent a significant portion of Vodacom's revenue, this led to a 5% drop in its share price. To diversify its revenue streams, Vodacom is launching a "super-app" in partnership with Jack Ma’s Alipay to boost non-voice income. Additionally, the company has spent R4 billion to mitigate the impact of loadshedding.
We believe that while Vodacom has strong fundamentals, it may take some time for the share to regain its former highs.
In its results for the six months to 30th September 2024, Vodacom reported a 1% increase in revenue, but headline earnings per share (HEPS) declined by 19.4%. Financial services revenue grew by 7.8%, contributing 11.4% to group service revenue. The company had 206 million customers and provided financial services to 83 million. Vodacom stated, "While our bottom line was impacted by various one-offs, I am confident that we are poised for a stronger second half performance."
In a trading update for the three months to 31st December 2024, Vodacom reported revenue up 1.6%, with service revenue rising by 11.6%. The company noted, "...the quarter was positively impacted by accelerated growth in South Africa's prepaid market, in addition to another stellar performance in Egypt and Tanzania, while network operators in Mozambique, including Vodacom, have been hampered by post-election tensions since October 2024."
Technically, the share fell from its high of 16,214 cents on 1st April 2022. We previously advised waiting for a clear break above its downward trendline, which occurred on 25th July 2024 at 9,836 cents. Since then, it has climbed to 11,611 cents, although it dipped slightly after the latest results.
At current levels, Vodacom appears relatively cheap, offering a dividend yield (DY) of around 3.93%. However, it operates in a dynamic environment where technology advancements and regulatory shifts present ongoing risks. While Vodacom remains a solid dividend payer and a stable telecom business, investors should be aware of potential regulatory and industry changes that could impact future performance.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.