Vodacom profit hit by Ethiopia start-up loss, upgrades service revenue target

JOHANNESBURG, May 13 (Reuters) - Vodacom Group on Monday reported a 10.8% decline in full-year earnings, impacted by start-up losses in Ethiopia and rising costs, but upgraded its group service revenue target thanks to its Egyptian unit and performance of new services.

The South African company, majority-owned by Britain's Vodafone, co-launched Safaricom Ethiopia in 2022 as part of a consortium, betting that the populous nation will power growth after about five years of investment. Vodacom has a direct 5.7% stake.

The biggest telecoms operator in South Africa said headline earnings per share fell to 846 cents in the year ended March 31, from 948 cents a year earlier.

"A combination of start-up losses in Ethiopia, higher finance and energy costs, the impact of absorbing inflationary pressures, and weaker exchange rates across markets, including the recent devaluation of the Egyptian pound, contributed to the 10.8% decline," Group CEO Shameel Joosub said.

The group, however, reported better-than-expected revenue growth of 26.4% to 151 billion rand ($8.21 billion), with service revenue surging 29.1% to 120.9 billion rand, benefiting from the acquisition of Vodafone Egypt.

Analysts, on average, had expected group revenue to climb to 146 billion rand, according to LSEG data.

On a pro-forma comparable basis, group service revenue growth was 9.2%, at the higher end of its medium-term range.

Vodacom, with 203.1 million customers across Africa, upgraded its group service revenue target to high single-digit growth from mid-to-high digit growth.

Chief Financial Officer Raisibe Morathi told reporters that the upgrade was due to the Egyptian business overcoming macro-economic challenges and improved performance of the rest of its Africa operations, especially Mozambique.

Like its peers, Vodacom has been transitioning its business from just being a mobile operator to a technology company as demand for fibre, financial and digital services and interconnected smart devices surges.

Vodacom is targeting new service revenue contribution to group service revenue of 25-30% in the medium term. In South Africa, about 16.6% of service revenue comes from new services - digital, fintech, fibre and internet of things.