Vodacom’s BEE deal shrinks profit. The network operator faced once-off costs to facilitate the 16.4 rand billion

sequel to YeboYethu.

Vodacom's 16.4 rand billion empowerment deal in September is the biggest in the

telecoms yet, eclipsing the 7.5 rand billion YeboYethu transaction struck 10 years

ago. It's also come at the expense of first-half profit due to the once-off

costs associated with the deal. To facilitate the new black economic

empowerment structure, it issued an additional 114.5 million shares.

Reporting back for the six months to end-September, the network operator said

SA revenue rose 3% as it added 2.5-million new contract and prepaid customers.

However, they spent less on the network, resulting in lower average revenue

per user (ARPU).

International it said Tanzania benefited from strong commercial momentum and

robust customer growth despite the intensified pricing pressure from

competitors. The DRC and Mozambique both delivered strong results. Service

revenue increased by 12.8% to 9.4 rand billion as it added 2.3 million new

customers, mostly in Tanzania and the DRC. Mobile money business M-Pesa grew

revenue by 25.2% to 1.4 rand billion and now contributes just over 15% of

International service revenue. In Kenya, Safaricom contributed 1.4 rand billion to

profit after an amortisation charge of 3.4 rand million.

Group revenue increased by 5.6% to 44.4 rand billion and was 5.4% higher at 42.7 rand

billion under the new International Financial Reporting Standards (IFRS) 15

accounting methodology. Under IFRS 15, service revenue rose 5.8% to 34.6 rand

billion and earnings before interest, tax, depreciation and amortisation were

up by 4.1% to 16.5 rand billion. Headline earnings per share (HEPS) declined by

13.5% to 387c, impacted by the new BEE deal and partially offset by

contributions from Safaricom. Excluding those transactions, it said HEPS would

have been 6% higher. It's raised its interim dividend by 1.3% to 395c per

share from 390c.

Vodacom said while it was encouraged by recent progress made in the regulatory

environment, including a clearer timeline on the allocation of 4G and 5G

spectrum, a number of concerns and inconsistencies remained following the

publication of a revised Electronic Communications Act and policy direction to

ICASA regarding unassigned high demand spectrum.

Greater certainty is required to sustain the high level of investment that the

industry commands," the person who said it here which is red "We remain

hopeful of finding an amicable solution to the finalisation of the new ECA,

the process to allocate unassigned high demand spectrum and the market review

by the regulator."

Its shares closed 67.7% lower at 120.30 rand.

Vodacom interim results - Group service revenue up 6.1% to 36.8 rand billion and

Group revenue increased 5.6% (5.4%) to 44.4 rand billion. VOD added 4.8 million

customers in the six months, up 10.7%, comprising 2.5 million in South Africa

and 2.3 million in Internationally

-- Travis Robson (@Travis_Robson) November 12, 2018