Vodacom (VOD) - Mo Money No Problem
Summary
Vodacom delivered a decent set of 1H18 results despite missing our and consensus HEPS estimates by 9.7% and 8.4%, respectively.
Data has overtaken voice as the biggest contributor to SA service revenue. Through data promotions designed to illicit more appetite for data services in SA, effective prices were driven down more than anticipated – we expect this to normalize in 2H18.
We detect more urgency from management around finding alternative growth streams. One potential growth vector is the enhancement of Vodacom’s M-Pesa offering given the insights derived from Safaricom.
We assess this opportunity and find that enhancements to M-Pesa could yield a 47.5% uplift to International M-Pesa revenue which could increase the contribution to service revenue from 13.6% to 20.1%. In our view, this is not too material, and we expect more urgent deployment of fibre and digital services over the next few years.
Vodacom is an investment holding company. Through its subsidiaries, Co. is engaged in the provision of a range of communications products and services including but not limited to voice, messaging, converged services, broadband and data connectivity. Co.'s segments comprised of: Corporate, which include the holding companies of Co. which do not relate to specific operating segment; South Africa, which include information relating to the South African-based cellular network, service provider and other business segments; and International, which include information relating to the non-South African-based cellular networks in Tanzania, Mozambique, Lesotho and the Democratic Republic of Congo.
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