Vodacom boosts profit as subscribers rise

JOHANNESBURG - South Africa’s leading mobile operator, Vodacom, posted a 23 percent rise in full-year operating profit as it signed up new customers, its 50 percent owner Telkom said on Tuesday.

By (Reuters)

Published: Tue 29 May 2007, 4:39 PM

Last updated: Sat 4 Apr 2015, 8:38 PM

Vodacom, which dominates its home market but lags rival MTN

across Africa, said operating profit rose to 10.9 billion rand ($1.5 billion) in the year to end-March, while revenue climbed 21 percent to 41.1 billion rand.

Subscribers jumped 28 percent to 30.2 million as more South Africans snap up mobiles in a country where fixed-line phones often do not reach rural areas. Vodacom, which is 50 percent owned by Britain’s Vodafone, also runs networks in five other African countries, where demand is growing.

Analysts said Vodacom’s operating profit, revenue and subscriber figures were in line with or slightly higher than market expectations.

The numbers initially boosted shares in Telkom, which is due to report its full-year results on June 13, but the stock retreated to slightly lag a firmer South African market.

‘Operating profit was about a percent and a half above my expectations, so that was feeding through to Telkom shares,’ said Sean Gardiner, a telecoms analyst at Morgan Stanley. ‘But it’s nothing dramatic, and we will have to wait for June to see where the growth is coming from.’

Telkom shares were up 0.56 percent to 178 rand by 0938 GMT, slightly lagging a 0.74 percent gain by the Johannesburg index of blue-chip stocks.

Oft speculated, oft denied

Telkom stock has gained ground in recent sessions after the government said last week it may not dismantle Telkom’s monopoly of the fixed-line connections into homes and offices, the so-called local loop, for another four years.

Market speculation that Telkom may sell its stake in Vodacom to Vodafone and buy another mobile operator surfaces regularly in Johannesburg and may also have boosted Telkom shares in the past week, analysts said.

The South African company has repeatedly denied it wants to sell, and Vodafone Chief Executive Arun Sarin told reporters on Tuesday the firm was happy with its 50 percent stake and declined to comment on whether it was interested in buying Telkom out.

Citigroup said in a research note dated May 22 it expected Vodafone to buy the rest of Vodacom for 5.2 billion pounds ($10.3 billion), valuing the whole company at 145 billion to 150 billion rand. Telkom has a market value of about 95 billion.

Vodacom provided no details about business conditions in its statement beyond the figures, saying it would provide analysis of all its markets next month.

MTN has fewer customers than Vodacom in South Africa but has expanded aggressively into 21 countries in Africa and the Middle East, with 44.3 million subscribers at the end of March, making it the biggest mobile operator in sub-Saharan Africa.

Vodacom has struggled to expand in Africa, where demand for mobile phones is booming due to patchy fixed-line infrastructure, because of a shareholder pact with Vodafone that stopped it from pushing north of the equator.

That stranglehold was lifted last year, but the company has yet to ink a deal in Africa since then.

Nigeria’s This Day newspaper reported earlier this month Vodacom was considering a $480 million offer for MTel, the mobile arm of privatised Nigerian telecoms company Nitel, in a deal that would give it a foothold in one of the continent’s fastest-growing and most lucrative markets.

Vodacom declined to comment on the report.

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