Vodacom hurt by Gateway acquisition

Mergers, Acquisitions and Financial Results

Since becoming a subsidiary of the Vodafone group in May this year, Vodacom has undertaken a number of initiatives to boost profitability. Through leveraging Vodafone's international presence and experience, the group secured solid revenue growth despite tougher operating conditions.

Vodacom released results for the six months to 30 September today, revealing a 9.9% growth in revenue over the comparable period in 2008. Group EBITDA increased by 8.0%, but earnings per share fell by 94.4% to 4 cents. This was mainly due to impairment charges of R3.2 billion, most of which related to Gateway in Nigeria. The group's operating profit decreased by 45.0% to R3,535 million due to a combination of the impairment charges and a 16.8% increase in depreciation and amortisation.

During the period, Vodacom did however solidify its position as the market leader in South Africa's broadband market, increasing its customer base by 53.5% to just over 964 000. The group's mobile data revenue grew by 30.1%.

Vodacom also noted that while South African mobile operators are under considerable pressure to reduce tariffs, the group is working with the authorities to ensure that the reduction in the termination rate is dealt with "responsibly" and will not impact too severely on profitability.

In its international operations, Vodacom has introduced price reductions in both Tanzania and the DRC due to falling revenues in those regions. This has been due to fierce competition, weak economic conditions and higher excise duties.

Frost & Sullivan