Vodacom set for a deal-making spree

Vodacom plans to accelerate broadband coverage across its African markets through additional deals and partnerships, after reporting the biggest jump in profit in more than a decade, CEO Shameel Joosub said in an interview. 

The Johannesburg-based company has received most regulatory approvals to buy a $750 million (R13 billion) stake in Remgro’s fiber business.

That cash injection from Vodacom following the deal will assist with immediate expansion plans in its home-market South Africa, said Joosub. 

The company may do other African deals, and pursue partnerships on towers, fiber and with satellite providers, he said. 

Vodacom already has a deal with Orange to build and operate 2,000 new base stations to improve rural coverage in the Democratic Republic of Congo (DRC), a partnership with Airtel Africa to share network infrastructure and tie-ups with satellite operators such as Amazon’s Project Kuiper, Elon Musk’s Starlink and AST SpaceMobile Inc.

Africa is home to the fastest-growing and youngest population in the world, with people using smartphones for a broad range of services ranging from banking to entertainment.

While broadband coverage has expanded and about 40% of Africa’s population uses the internet, that lags the global average of around 70%. 

Africa’s vastness makes it expensive to roll out infrastructure with customers in rural areas, who are generally not able to spend a lot of money to access services.

Companies such as Vodacom, South Africa’s biggest carrier by subscribers, cross-town rival MTN, and other operators on the continent are increasingly looking at options to share infrastructure to ensure broader coverage. There is also more room for consolidation, said Joosub.

For the first six months of the year through September, Vodacom’s profits jumped by a third, the most in more than a decade.

The company reported earnings per share of R4.72, compared with R3.54 in the same period last year. Vodacom had last year reported one-off costs related to its businesses in the DRC and Ethiopia. Headline earnings per share grew 32% to R4.67.

Total sales grew 11% to R81.6 billion, helped by a strong performance at Egypt, one of Vodacom’s newest markets, and improved results from other international markets including Kenya’s Safaricom, of which Vodacom owns a third. 

Vodacom had projected higher earnings growth before trimming its outlook last week. That followed an out-of-court settlement agreement with an ex-staffer who claimed compensation for a popular call-back service he proposed more than two decades ago. The settlement amount was not disclosed in the results.