Sunday, May 21, 2023

Vodacom shareholders await $9m dividends

Vodacom shop

Tanzania's reduction of mobile transfer levies accelerated Vodafone's contribution to financial inclusion agenda through M-Pesa services. PHOTO | AFP


Tanzania’s listed telco Vodacom is set to declare more than $9 million dividends to

shareholders after bouncing back to profitability in the financial year ended March 31, helped by strong growth in mobile data and mobile money business.

The telco, which is 75 percent majority owned by South Africa’s Vodacom Group, disclosed in its preliminary condensed financial statements that the board will recommend a final dividend of at least 50 percent of the net earnings following the company’s complete turnaround from the loss-making territory.

The Dar es Salaam Stock Exchange-listed telco posted a net profit of Tsh44.6 billion ($18.85 million) from a loss of Tsh20.3 billion ($8.58 million) in the financial year ended March 31, 2022, translating into a final dividend payout of at least Tsh22.3 billion ($9.42 million).

The telco intends to pay as much of its after-tax profits as will be available after retaining such sums and repaying such borrowings owing to third parties as shall be necessary to meet the requirements reflected in the budget and business plan, taking into account monies required for investment opportunities.

“There is no fixed date on which entitlement to dividends arises and the date of payment will be recommended by the Board and approved by the shareholders at the time of declaration, subject to the Dar es Salaam Stock Exchange market listing requirements,” the firm said.

Vodacom Tanzania is 75 percent majority owned by South Africa’s Vodacom Group which in turn is majority (65 percent) owned by Vodafone Group Plc, a company based in the United Kingdom.

Smartphone penetration

The M-Pesa recovery was partially supported by reduction in government levies on mobile money transfer and withdrawal transactions.

The telco’s customer base grew by 8.9 percent to 16.7 million, with data customers increasing by 15.1 percent to 8.7 million, of which 60.3 percent were smartphone users, representing a 6.1 percentage point increase in the penetration of smartphones.

M-Pesa revenues increased 8.4 percent to Tsh357.13 billion ($150.94 million) from Tsh329.55 billion ($139.29 million) marking a recovery to the levels last reported two years ago, prior to disruption from the levies on mobile money.

Read: M-Pesa share in Safaricom revenue deepens

Mobile data revenues grew by 34.2 percent to Tsh273.7 billion ($115.68 million) from Tsh203.98 billion ($86.21 million) during the period under review while fixed revenues grew by 27.3 percent to Tsh19.5 billion ($8.24 million) from Tsh15.32 billion ($6.47 million).

On the other hand, mobile voice revenue declined by 1.2 percent to Tsh283.54 billion from Tsh286.98 billion.

Mobile incoming revenue declined 3.7 percent to Tsh46.3 billion ($19.56 million) largely due to 21.8 percent lower average incoming price per minute, following a 23.1 percent drop-in mobile termination rate (MTR) from Tsh2.6 ($0.001) to Tsh2 ($0.0008) per minute starting January 2022 in line with the regulatory glide path.

The decline in price was partly offset by 23.3 percent higher incoming minutes, driven by aggressive market competition in voice offers, and growth in customers.

The group’s total service revenue grew by 10.2 percent to Tsh1.05 trillion ($443.8 million).

During the period, the company invested Tsh156 billion ($65.93 million) in network capacity, coverage and IT infrastructure improvements.

It enhanced its broadband coverage with 390 additional 4G sites, 228 new 3G sites and in September 2022, it announced a key technology milestone with a launch of Tanzania’s first-ever 5G network, ending the financial year with 231 sites supporting this technology.

In October 2022, Vodacom participated in a spectrum auction conducted by the Tanzania Communications Regulatory Authority and successfully acquired four blocks of low and mid-band spectrum for a price of $63.2 million.

This significant investment is expected to accelerate the telco’s future network expansion plans and help unlock the growth potential from products such as fixed-wireless access.

Read: Tanzania registers 3m new mobile money subscribers: report

The network investment, coupled with smartphone adoption and investment in spectrum supported 4G data usage growth of 57.1 percent.

“Looking ahead, we will continue with our commercial execution momentum and focus on managing our expenses to improve returns to our shareholder,” said Philip Besiimire, Chief Executive, Vodacom (Tanzania).

In June 2021, the Tanzania government amended the National Payment System Act (NPS Act) and Electronic & Postal and Communication Act (EPOCA) by introducing levies on mobile money transfer transactions and airtime recharges.

For mobile money transfer and withdrawal transactions, a transaction value dependent levy of between Tsh10 ($0.004) and Tsh10, 000 ($4.22) was implemented from July 15, 2021.

However following engagements with industry players and due consideration by the government, an initial 30 percent levy reduction, to a maximum levy of Tsh7,000($2.95) was effected on September 3, 2021, and on July 1, 2022, an additional 43 percent reduction to the maximum levy band was passed through the Finance Act 2022, marking a cumulative 60 percent reduction since the levy’s introduction.

This reduction set the maximum levy chargeable at Tsh4, 000($1.69).

On October 1, 2022, through a special supplement to the National Payment System (Electronic Money Transactions levy) (Amendment Regulations) the maximum levy chargeable was set at Tsh2,000 ($0.84), equivalent to 20 percent of the levy charged at introduction.

According to Vodacom this reduction in levies on mobile money transfer has further reduced end-user charges and has meaningfully revived and accelerated the company’s contribution to the financial inclusion agenda, through the use of M-Pesa services.

“The Board will recommend a final dividend, in relation to the financial year ended March 31, 2023, for approval by the shareholders at the annual general meeting... “will be in accordance with the dividend policy to pay out at least 50 percent of earnings after tax,” firm said.

The telco’s improved performance during the period under review was largely as a result of strong performance of mobile data business, recovery in M-Pesa operations and accelerated fixed growth.

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