African Telecom Giant Vodacom First-Half Profit Drops 18% on Currency Swings

Vodacom Group Ltd., Africa’s largest phone company by market value, has reported an 18% decline in first-half net income, primarily due to currency devaluations in Egypt and Ethiopia. The company’s net income fell to 6.84 billion rand ($388 million) during this period, according to a statement released Monday. The Johannesburg-based company also announced its third consecutive interim dividend cut, reducing it from 3.05 to 2.85 rand per share.

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The challenge of currency devaluation has been affecting many companies operating across Africa, sometimes resulting in significant profit losses in the most impacted regions. Vodacom specifically experienced a 1.1 billion rand reduction in earnings in Ethiopia, where the government abandoned its fixed exchange rate with the dollar. This trend has affected other industry players as well, with competitor MTN Group Ltd. seeing profits decline due to the naira’s devaluation in Nigeria.

According to Vodacom CEO Shameel Joosub, the currency outlook in Egypt appears more stable going forward. He explained that the major impact came from Ethiopia’s currency reform, which required immediate accounting for all dollar-based assets. Despite these challenges, these markets hold significant growth potential for Vodacom, which serves over 200 million customers. The company plans to continue investing in data, content, fiber, and financial services in Egypt, with expectations of growth acceleration once currency issues stabilize.

Peter Takaendesa, head of equities at Mergence Investment Managers, noted that while revenue trends show promise, currency headwinds continue to pose challenges. The news impacted Vodacom’s stock, which fell 5.4% in Johannesburg trading, reaching its largest intraday decline since January. The company’s value now stands at 205 billion rand, reflecting a 6.7% decrease this year.

The company faces additional challenges in South Africa, where regulatory hurdles have blocked its planned fiber deal involving a stake in Remgro Ltd.’s business. However, Vodacom maintains ambitious goals for diversification, with CEO Joosub aiming for 25% to 30% of revenues to come from new services such as fintech and digital services. The company has established itself as Africa’s largest fintech business, serving 83 million fintech customers.

Here’s what it means for you:

1. If you’re in countries like Egypt or Ethiopia, you might see continued investment in infrastructure despite the currency challenges
2. The dividend cut means shareholders will receive less money, but this doesn’t directly affect regular customers
3. Vodacom is transforming from a traditional telecom into a more diversified tech company. They’re heavily investing in fintech (financial technology) and digital services.

Source; Vodacom, Bloomberg

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