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Vodacom revenue boosted by increased data demand

Together with striking up a partnership with Alibaba’s Alipay, the company has spent a massive R10.1 billion helping alleviate several Covid problem areas in SA: Shameel Joosub – CEO, Vodacom.

NOMPU SIZIBA: Vodacom came out with its annual financials today. My colleague Ryk van Niekerk caught up with the CEO.

RYK VAN NIEKERK: Telecommunications group Vodacom reported results for its financial year to the end of March 2021 today, which show that the company is one of the largest companies in South Africa. Revenues rose by 8.3% to R98 billion, and that excludes the contribution of its Kenya subsidiary, Safaricom. Headline earnings rose by nearly 4% to R16.6 billion or R9.80/share. A final dividend of R4.10 was declared, which means the total dividend for the year was R8.25. That was 5% higher than the previous year. And Vodacom added 8.2 million new customers to its various operations during the year, and its total subscriber base now numbers 124 million.

Shameel Joosub, Vodacom CEO, is on the line. Shameel, thank you so much for joining me. It seems to have been a very challenging year. I think you started right after that first hard lockdown we saw last year. To what extent did Covid-19 affect the business and your headline earnings growth?

SHAMEEL JOOSUB: It was quite interesting. I think, first and foremost, the way we approached the year was to say that, look, we need to step up as a corporate and play our role in terms of our social contract. Essentially what that meant is that, firstly, there were the price cuts, which cost us about R3 billion in South Africa on April 1 last year. And then of course the further price cut, which happened on April 1 this year, which will have between a R1.5 and R2 billion impact.

Then we zero-rated M-Pesa person-to-person money transfers across many of our countries to help with social distancing and so on. That then basically cost us another R2 billion across the group. And then we stepped up and played a number of different roles from the free phones and devices that we gave to health workers in South Africa and across our markets, to the doctor consults with Discovery, to providing equipment and help with the vaccinations, and the cost of the vaccinations across markets. And recently, of course, the R87 million that we’ve contributed in helping with the cold chain and logistic supports across our markets for the distribution of the vaccine, so that can reach all our people. So we played that part.

The other part was that, instead of stepping back into the crisis, we stepped up and increased our capital investment to be able to cope with the traffic increases. We saw our role as being able to make sure that people could work and educate from home and entertain from home seamlessly. We invested R13.3 into capex, of which R10.1 billion was spent in South Africa alone. That helped us to offset, I would say, a number of the impacts, if you like, of Covid.

So yes, we took an impact, but I think we still managed to produce a decent set of results.

RYK VAN NIEKERK: Yes. I think that R10 billion you invested in South Africa is an enormous amount. It’s pretty much what SAA received from government to keep it in existence. It’s a lot of money.

But tell us about the traffic increases you have experienced. What did you see on the ground? How much more data did your clients use during this lockdown period?

SHAMEEL JOOSUB: We saw a traffic increase – of course it peaked at about 89% during lockdown, but through the year it was a 56% increase overall in traffic, 39% [per customer]. And of course, a lot of that was also free traffic because, remember, through our ConnectU platform we made it possible for 15.5 million people to access cheaper data offers, discounted free schools and universities, and of course Free Office, so the schools and universities could access their portals and job sites and all those types of thing.

But on an individual customer-pay basis, I’d say a 39% increase in usage per customer to 2.1 gigs per customer in South Africa today.

RYK VAN NIEKERK: You also announced today that you’re on the verge of launching a new financial services and e-commerce super-app. Tell us about this app.

SHAMEEL JOOSUB: With the success that we’ve had in financial services across the continent – I don’t think many people realise this – we are the biggest fintech in Africa now. We have 58 million customers buying a financial service product from us. That’s 46% of our base. We process R4.3 trillion a year in financial service transactions. So it’s massive.

RYK VAN NIEKERK: Shameel, that is a phenomenal amount. Through what type of products do you actually attract this spend and transactions?

SHAMEEL JOOSUB: That’s M-Pesa. About 13 million of those customers are in South Africa. The rest of course are across our markets, including Kenya. It’s person-to-person payments, it’s bill payments, it’s borrowing. People can do a nano-loan. If you don’t have money for food you can borrow some and pay it off later – those type of things.

And then of course the merchant part has also been very, very successful for us, where we do merchant payments and so on because, remember, people are not paying by credit card, they are paying by M-Pesa.

In South Africa, we haven’t introduced the M-Pesa platform, but our financial service business has been growing exponentially over the last couple of years, now generating about R2.4 billion of revenue with 13 million active users. And what we’ve done now is to take it to the next level and essentially introduce the Alipay platform, which we will call VodaPay in South Africa.

Alipay is the biggest global provider of a super-app, if you like. The way to think about it is as a single app from which you can do everything, from which you can pay anyone, you can lend, you can pay your bills, you can invest from the app, and so on. So it’s like a big digital shopping mall and all your big retail brands will be becoming onto the platform and you’ll be able to shop from the platform itself without leaving the platform, with everything personalised. So it becomes a very, very big play going forward.

RYK VAN NIEKERK: That stems from the Alibaba application in China, the one from Jack Ma. How does that work? Do they license you to use the platform, or do you develop your own platform based on their model?

SHAMEEL JOOSUB: Actually they license the platform to us. There are two parts. The full e-commerce part, which is like Amazon, is called Alibaba. And then the super-app, if you like, is called Alipay. They are two separate companies, but of course still part of the Jack Ma stable, if you want to put it that way. Alipay now has 1.5 billion users. It’s the first time it’s been licensed outside Asia. Yes, we’re quite pleased that we managed to tie up the partnership. We see it as transformational, not just for South Africa but for our other markets as well because, based on the success that we create here, we’ll then replicate it across our markets.

RYK VAN NIEKERK: You will be able to walk into, say, a Makro, and pay with your phone – no more credit cards you need to swipe and the like? It’s totally a wireless and contactless payment system?

SHAMEEL JOOSUB: Correct. You can link your card if you like, we can go and put cash in at a retailer. So you’ve got different options. You’ve got your own store value. The big thing as well is that you’ll be able to borrow against it. So remember, today if people don’t have air time, we lend them airtime, which is quite amazing. Just to give you a stat, some 43% of the time people now borrow airtime from us before they buy airtime from us. Taking that same capability, and you would have seen recently we launched what I call AdvanceMe a Nando’s, AdvanceMe a burger. So if you don’t have money for a Nando’s burger, we’ll lend you money for the burger and you can pay it off later. I call it ‘eat now, pay later’.

RYK VAN NIEKERK: And that’s a financial service you provide, it’s not via a service provider?

SHAMEEL JOOSUB: This is direct withdrawals.

RYK VAN NIEKERK: And if you make a payment, would that be linked to a bank account?

SHAMEEL JOOSUB: At the moment the payment goes off card, but when the VodaPay platform launches it will go off the store value – in the wallet, if you like – of the VodaPay platform.

RYK VAN NIEKERK: And when will you launch this?

SHAMEEL JOOSUB: We are launching it in what we call Q3 of the fiscal year. So towards, I’d say, the latter part of the calendar year.

RYK VAN NIEKERK: I think that will be exciting. Shameel, thank you so much for your time today. That was Shameel Joosub, the CEO of Vodacom.

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Why are they still trying to sell 2 years contracts? I am mentioning just a new contract old phone. They want 2 years with all kind of PENALTIES, if you leave early. You think marketing would do a 1 year???????? You get what you pay for

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