Vodafone reaps rewards

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Vodafone Reuters. A woman walks past the logo of Vodafone company in Luxembourg.

Almost two decades after Vodafone entered Africa, the region is turning into one of the group’s biggest profit generators.

The rising powerhouse is helping make up for Europe’s slowdown after chief executive Vittorio Colao had to write down $9.5 billion (R81bn) on the value of Vodafone’s Spanish and Italian units last year.

Vodafone’s biggest African business, Vodacom, surpassed the company’s UK unit in 2010 by profit, and it outpaced the Spanish division the next year.

With earnings expanding at 50 percent annually in some countries, profit from Africa could overtake that from all of southern Europe in as little as three years, said Nick Read, the executive who heads Africa.

“There’s a massive opportunity in penetration that we need to drive forward on,” said Read, who has run Vodafone’s operations in Asia and the Middle East since 2008 and took on Africa in 2010.

Africa will be the industry’s fastest-growing region by subscribers over the next five years as firms build advanced networks and customers switch to broadband, according to consultant AT Kearney. While Europe has more cellphone accounts than people, there is ample room for handset ownership in Africa to grow, from about 73 percent of the population last year to 85 percent in 2015, Kearney predicts.

As well as Vodacom, which operates in South Africa, the Democratic Republic of Congo, Mozambique, Tanzania and Lesotho, Vodafone has a 70 percent stake in Vodafone Ghana and a 40 percent holding in Safaricom in Kenya. It also co-owns an operator in Egypt.

Vodafone reported £939 million (R12.9 billion) in earnings before interest, tax, depreciation and amortisation from its 65 percent share in Vodacom in the six months to September, up 15 percent from a year earlier excluding acquisitions and currency swings.

Vodafone and its rivals have found that building a modern network from scratch in countries with high growth rates and little infrastructure has enabled them to become banks as well as phone companies.

In sub-Saharan Africa, where just a quarter of adults have a bank account, 16 percent of people say they have used a cellphone to pay bills or receive money, the World Bank says.

M-Pesa, Vodafone’s mobile payment system, is used by 15 million people in Kenya and moves the equivalent of 31 percent of the country’s gross domestic product through its system, according to Safaricom chief executive Bob Collymore.

Vodafone entered Africa in 1994 as a founding partner of Vodacom, which listed on the JSE in 2009. Its shares have more than doubled since then, compared with just a 27 percent gain for Vodafone. - Bloomberg


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