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Vodacom is advancing 45% of prepaid recharges in SA on credit

No surprise the operator is aggressively pursuing financial services … there are far higher margins.
The operator has 13.5m financial services customers in the country, the majority of whom are those who use its Airtime Advance service. Image: Bloomberg

It is somewhat remarkable that Vodacom’s core South African unit is advancing nearly half its total prepaid recharges, 45.2%, in the form of ‘credit’ using its Airtime Advance service.

This equates to a total of R13 billion in airtime that was advanced, effectively as a ‘disguised’ nano loan.

This service is used by more than 10 million customers in the country and offers advances for up to R20 of airtime and R18 of data (125MB) based on the subscriber’s recharge history (how often they top up and how much they add).

The advance has to be repaid within 30 days and is deducted from the subscriber’s next recharge.

For every advance, Vodacom charges an ‘access fee’ of R1. This is a high margin business for the operator – at a R20 advance, the fee is 5%, while at a R5 advance, the fee is 20%. (Remember there are margins in the underlying airtime and data products too).

Using the values of the bundles available, the total recharges (R13 billion) and its total financial services revenue in SA, it can be calculated that Vodacom is making upwards of R1 billion in fees annually from providing this service.

While there will be some element of bad debt, this is likely immaterial (far below 1%) as a subscriber who doesn’t settle their advance will see their credit limit decrease once they do recharge. (In addition, any airtime transfers to a number that has an outstanding advance will be used to settle that advance).


Total financial services revenue in South Africa was R2.7 billion for the year ended March 31.

The operator has 13.5 million financial services customers in the country, the majority of whom are those who utilise the Airtime Advance service. It says it generated insurance revenue of $70 million (more than R1 billion). It has 2.4 million insurance policies, 15% higher than in FY2021, and revenue from this product was up 13% year-on-year.

Read: Vodacom adds 6.2m customers across the group [Nov 2021]

Across the group, it reported a total of R22.2 billion in financial services revenue (due to accounting rules, it recognises R11.2 billion of this).

The bulk of this (R14.5 billion) is from associate Safaricom (Vodacom owns 34.9% of the Kenyan operator), driven by M-Pesa.

In Tanzania, the DRC, Mozambique and Lesotho, M-Pesa generated R5 billion in revenue from 16.5 million customers. By comparison, in 2021 MTN generated R15.9 billion in fintech revenue across its operations. Of this, 29% (R4.6 billion) was from airtime advance services.

From the R11.2 billion in revenue from Vodacom’s financial services endeavours, it generated R4.4 billion in profit before tax – this is a margin of 40%.

This is higher than the group’s overall margin – its earnings before interest, tax, depreciation and amortisation (Ebitda) margin of 38.8% – and definitely far greater than that from relatively low margin data revenue.

Nowhere can the effect of higher financial services margins be seen more clearly than in the Safaricom business in Kenya. This unit’s Ebitda margin is 51.7%!

Growth opportunities

Vodacom sees three major addressable market opportunities:

  1. Mobile payments (where it has already captured a quarter of the $4.4 billion revenue pool it sees in its markets by 2026);
  2. Lending (it granted $6.1 billion in micro loans last year); and
  3. Insurance (where last year it captured just 0.1% of the opportunity).

In South Africa, 14.4% of revenues (R8.4 billion) come from what Vodacom terms ‘new services’. This includes financial services, digital services, Internet of Things (IoT) and fixed (fibre). In its international businesses (excluding Safaricom), this figure is 27.6% (R6.1 billion). For Safaricom, with the dominance of M-Pesa, 42.5% of revenue comes from these ‘new services’.

For the group, this total is 18% of revenue. Within three to five years, Vodacom expects this to be between 25% and 30% of total revenue, representing a compound annual growth rate of 20% over the next three years.

This means its core mobile business will reduce to ‘just’ 70% to 75% of total revenue.

Given the difference in margins, it is no surprise that Vodacom is aggressively pursuing financial services.

Vodacom reported a 4.5% increase in revenue to R102.7 billion for FY2022. Headline earnings per share was up 3.4% to 1013c, while the total dividend was up by 3% to 850c.

Its purchase of 55% of Vodafone Egypt (for $2.7 billion/R41.1 billion) as well as the deal in South Africa to acquire 30% of the fibre assets of CIVH (Community Investment Ventures Holdings), which include Dark Fibre Africa and Vumatel, are both nearing completion. Both require regulatory approvals, which are expected this year.


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Nobody thinks selling weekly or monthly data on credit is a red flag???

End of comments.



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