Vodacom and MTN profit margins – Here is the truth

10 May 2019

Internet

The Competition Commission recently released its Data Services Market Inquiry report, which found that South African data prices are high – particularly for mobile prepaid data.

It also found that Vodacom and MTN charge higher prices in South Africa than other countries in which they operate.

The Commissioner of the South African Competition Commission, Tembinkosi Bonakele added that local operators have much higher profit margins than comparative countries.

“We have looked at their margins in South Africa compared to other parts of Africa and it is very clear that there are exorbitant prices here,” said Bonakele.

“We’ve seen profit margins in the order of 30% in South Africa. When you look at comparable countries you see profitability margins of about 12%.”

“What they cannot deny is that they make a lot more in South Africa,” he said.

Vodacom and MTN’s EBITDA margin

To compare the net profit margin of companies with international operations can be misleading as it involves the different tax structures in these countries.

Mobile operators therefore prefer to report on their EBITDA (earnings before interest, tax, depreciation and amortization) and EBITDA margin to measure performance.

EBITDA margin is related to profitability and is equal to EBITDA divided by total revenue.

MTN’s latest annual report shows that its EBITDA margin in South Africa is 35%, which is on the lower end of its global operations.

Vodacom’s EBITDA margin in South Africa is 40.1% which is significantly higher than the 28.2% of its international operations.

The Competition Commission’s claim is therefore not true for the countries where MTN operates, while it is partly true for Vodacom’s operations.

The Commission was asked for comment about its Data Services Market Inquiry report, but the organisation did not respond by the time of publication.

Source: MyBroadband