Vodacom feels pinch of lagging SA economy; shaves R19bn off market cap

By Loni Prinsloo

(Bloomberg) – Vodacom Group Ltd. fell the most in more than two months after the wireless carrier with the most South African customers reported falling sales in its home market, where a slower-than expected economic recovery dampened consumer spending.

Revenue in South Africa – the carrier’s largest market – declined 0.9%, compared with 6.2% growth a year earlier.

Key insights

  • The carrier, a unit of London-based Vodafone Group Plc, has been combating lower customer sales with richer data offerings in its bundles to lure additional customers.
  • Vodacom’s international business – including markets such as Tanzania and Mozambique – continued to be a bright spot, growing 13% off a small base.
  • Revenue from mobile-money services increased more than 30%.
  • The company is focused on cost-cutting with additional spectrum and has been awaiting a long-delayed auction for the resource in South Africa scheduled for April. Carriers in the country are spectrum-poor relative to international peers, with low allocations by the government to date.

Market reaction

Vodacom shares fell 8.9% at 9:13am to trade at R120 in Johannesburg, extending the decline over the past year to more than 20%. Investors have concerns about spectrum auction delays and regulation on data pricing.

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“South Africa was really disappointing and below market expectations,” said FNB Wealth and Investment money manager Wayne McCurrie, pointing to “massive” industry challenges. “Voice revenue is structurally reducing, data prices per unit is falling as fast as volumes are increasing, and companies need to invest massive capital on infrastructure.”