43 / 98
International growth accelerating
Our strategic focus areas of data and M-Pesa delivered pleasing
growth of 7.4%*, with service revenue reaching R16.8 billion.
Tanzania delivered on their strategy in a highly competitive
environment, resulting in good revenue and customer growth.
Mozambique and Lesotho produced excellent results, with
solid execution in data and M-Pesa monetisation. The DRC has
seen an improvement, with stabilisation in currency and the
macroeconomic environment.
We are making good headway in meeting the growing demand
for data, by expanding our data networks, improving customers’
network experience in high-demand areas, and investing in
business intelligence solutions for smart product offers.
Our affordable smart device strategy, coupled with ‘Just 4 You’
propositions in each of our markets, is helping to monetise data
demand which remains a priority in our International markets.
M-Pesa revenue grew strongly, contributing 13.8% to
International service revenue. We now have 11.8 million M-Pesa
customers. We will continue to drive M-Pesa through new
solutions such as lipa kwa M-Pesa in Tanzania and growing
our agent network in Mozambique.
Safaricom
Safaricom finished the year with good momentum despite a
relatively volatile political environment. Service revenue grew
10.0% and EBIT grew 12.6%. Underpinning the results was strong
expansion of Safaricom’s customer base and strong growth in both
data and M-Pesa revenue. The continued good performance of
Safaricom demonstrates how we strategically undertook to
diversify the Group’s economic exposure and earnings profile in a
single transaction by acquiring a stake in a premier East African
telecom operator.
Going forward, we will be deepening our relationship with
Safaricom to ensure that we grow value for both businesses.
Our focus areas will be expanding the M-Pesa ecosystem, and
developing our International operations to get to the same levels
of sophistication as Safaricom. We will share our Big Data learnings
with Safaricom, both in personalised offers, and finally expand on
our Enterprise opportunity, especially in East Africa.
Embracing Big Data, Artificial Intelligence
and machine learning
A key pillar in improving stakeholder value is to deliver deeper
insights in the business through Big Data analysis, machine
learning and improved reporting. In finance, our strategy is to drive
digitisation of our reporting frameworks, with the aim of delivering
better business insights, facilitating swifter decision-making, and
using robotics automation to improve the efficiency of repetitive
processes.
The adoption of IFRS 15 has been a significant project for the
finance team and was successfully implemented for all our
markets. During the 2019 financial year, we will start reporting our
results on an IFRS 15 accounting basis, while we will still disclose
the existing IAS 18 basis for comparative purposes.
Delivering shareholder returns
Over the past three years, we have returned R38 billion in
dividends to our shareholders, maintaining an average dividend
yield of 5.4%. Vodacom’s return on capital employed (ROCE)
rebased from 45.4% to 30.5% due the acquisition of Safaricom
which added R42 billion to our asset base.
Protecting shareholder value and delivering long-term
shareholder return requires us to adhere to highest standards of
corporate governance and financial control. The recent series of
governance failures in South Africa, involving large corporates,
public institutions and audit firms, has destroyed shareholder
value. Restoring trust through evidencing good governance and
control is paramount.
We have adopted the King IV framework and have well-developed
Board and governance structures at Vodacom Group. We have
similar Board and governance structures in our operating
companies outside of South Africa. Our Code of Conduct provides
standards for integrity, competence, responsibility, accountability,
fairness and transparency, and sets the tone from the top. We have
dedicated programmes to promote our corporate values, business
principles and the Code of Conduct within the organisation.
Our Chairman’s ethical leadership event remains an important
event in the ethics calendar for each year. We invite ethics leaders
such as Professor Mervyn King or Advocate Thuli Madonsela to
address staff and senior leadership on aspects of ethics and
accountability. Our combined assurance model allows for various
levels of defence.
Looking ahead
The rapidly evolving telecommunications landscape, together
with market uncertainty, requires Vodacom to be more agile and
innovative. Our Vision 2020 strategy that we embarked on last
year is taking shape, with clear progress being made throughout
the Company.
Our balance sheet remains strong, further boosted by the
acquisition of Safaricom, providing us with sufficient capacity to
leverage, and enabling us to execute our growth strategy and
realise potential merger and acquisition (M&A) opportunities
where these contribute to adding shareholder value.
Over the next three years, we are targeting Group service revenue
growth of mid-single digit, Group EBIT growth of mid-to-high
single digit, and capital intensity of 12% – 14% of Group revenue.
These targets are on average, over the next three years, and are on
a normalised basis in constant currency, excluding spectrum
purchases and any M&A activity. This assumes broadly stable
currencies in each of our markets, as well as stable macro and
regulatory environments. These targets exclude the effects of
adopting IFRS 15 and IFRS 16.
In closing, I would like to thank the Board for their continued
guidance throughout the year.
Till Streichert
Chief Financial Officer
1 June 2018
39
Our business
Our performance
Our governance
Administration