Vodacom profits drop due to high energy costs and blackouts

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High inflationary pressure, energy costs, market volatility, ongoing blackouts (load shedding) and the rising cost of living have had an impact on mobile operator Vodacom profits.

The group has reported a 9% decline in half year net profits, compared to last year. This was a drop from R8.9 billion to R8.1 billion this year.

The Group released its interim results for the period 1 April to 30 September 2022 earlier today (Monday 14 November).

Its CEO, Shameel Joosub, says they have also invested close to R6 billion in its networks to enhance customer experience and have spent another R2 billion in batteries due to continued rolling blackouts. Vodacom Group CFO, Raisibe Morathi, says they are looking at ways to reduce the high energy costs for the corporation.

They are also looking at suppliers across the board and re-negotiating some of the contracts where possible. “So. we actually started noticing the high inflationary effects. So we’re looking at energy costs, negotiating with the oil majors, in terms of the diesel side of things, and negotiating with the oil majors to get wholesale pricing. So that applies currently in SA, but we’re looking at expanding that reach to the other markets. The discretionary costs, just, you know, limiting some of the activities to do with travel to do with the functions and just basically scaling them.”

Morathi says they are looking at utilising more solar power. She says the Group forecast to continue spending more on energy costs for the coming months. “So overall, we expect the increase to be roughly in the ballpark of about half a billion. So it’s an example we announced a few months ago, that we will be putting solar panels across this whole campus. We’re also looking at other areas where we can be able to use alternative energy. We looking at getting into more impactful IPP arrangements so that we can alleviate those costs and its pretty much in line wit our ESG strategy.”

Joosub says increases to their costs have been exacerbated by the Russia-Ukraine war and lagging costs from pre-COVID 19.

The Group says it has spent billions to improve its networks and this has finally paid off. Joosub says they have also seen data utilization during rolling blackouts. “We’ve invested quite heavily in terms of creating network resiliency, we spent over R2 billion in the last two years, some of the consequences you’re seeing in the financials, to be frank. But from a network perspective, we’ve seen our network resilience be much better than competition that’s coming through in our NPS scores. So the investment is definitely paid off.”

Vodacom says it has seen an increase of its super app, Vodapay since its introduction last year -with R2.2 million registered users. It plans to add cash capabilities and introduce micro lending in the future under its Vodacom financial services offerings.

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