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UPDATE 3-Vodacom profit drops, cuts international spending
November 9, 2009 / 8:10 AM / 8 years ago

UPDATE 3-Vodacom profit drops, cuts international spending

* Headline EPS down 12.4 pct

* Earnings hit by an impairment charge

* Mobile customer base up 16.5 pct

* Cuts capex by 33 pct at international operations (Adds analyst reaction, CEO comments))

By Tiisetso Motsoeneng

JOHANNESBURG, Nov 9 (Reuters) - Vodacom (VODJ.J), South Africa’s biggest wireless phone operator, will slash spending by more than a third at its international operations after first-half profit fell more than 12 percent.

Vodacom, majority owned by Britain’s Vodafone (VOD.L), said on Monday first-half profit fell 12.4 percent to 219 cents after taking a 3.2 billion rand writedown on an acquisition and gave a cautious outlook as the downturn hit consumer spending.

“The macroeconomic outlook is uncertain but we’re seeing early signs of recovery, specifically in South Africa,” said Pieter Uys, Vodacom chief executive. “(But) it is too soon to be confident in a sustained recovery across all customer segments.”

Vodacom, which competes with MTN (MTNJ.J), will cut its international capital expenditure by 1 billion rand ($134.4 million) to 2 billion for the full year to end-March 2010 as revenue growth stalls, partciularly in Tanzania and the Demnocratic Republic of Congo.

The group’s capex in South Africa, where the company sees further growth in broadband, was set at 5 billion rand.

Analysts said the company had been losing market share in the DRC and Tanzania as new entrants in the sector push tariffs lower.

“In Tanzania, competition has intensified significantly ... Eleven mobile licenses were issued by the end of 2008,” said Spiwe Chireka, an analyst at Frost & Sullivan.

“Vodacom will be under continued pressure there, as a few of those operators are CDMA providers that will be able to undercut Vodacom’s pricing.”


The company, which debuted on the Johannesburg stock exchange in May, said the number of mobile users increased by 16.5 percent to 41.6 million.

But Uys said regulatory hurdles such as a new law which compels consumers to register all and existing phone numbers, would knock subscriber growth rates.

Vodacom said its subscriber base in South Africa grew 11.7 percent to 28.2 million but spending on calls declined on both pre-paid and contract users.

Shares in Vodacom were up 0.99 percent to 52.90 rand by 1044GMT, in line with its rival MTN but slightly lagging a 1.55 percent gain in the JSE Top 40 index of blue chips .JTOPI. (Editing by Greg Mahlich and David Cowell) ($1=7.548 rand)

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