Vodacom banks on long contracts to help it move ‘beyond mobile’

For the year ending 31 March 2025, Vodacom Group reported a modest 1.1% increase in revenue to R144.5-billion. But the company would prefer you focus on the “normalised” version of the story, where service revenue didn’t shrink by 0.1% but rather grew by a healthy 11.2% once currency movements and other adjustments were stripped out.

This raises the now-familiar question: when does normalisation stop being clarity and start becoming creative accounting?

“Our normalised results showcase the underlying strength of our operations,” said Vodacom Group CEO Shameel Joosub. “Financial and digital services, fixed and Internet of Things offerings contributed R11.2-billion, or 17.8% of service revenue in South Africa.”

That “underlying strength,” however, isn’t always where it seems.

Guess who’s driving growth?

Despite the narrative of its evolution into a “TechCo”, the real growth engine – as Joosub alludes to – lies in Vodacom’s financial services business. Normalised figures show a 17.6% surge in this segment, compared with a far more modest 7.6% growth on a reported basis.

Financial services now account for 11.6% of consolidated service revenue, up from 10.5% the previous year.

Geographically, Egypt delivered standout results, with normalised financial services revenue rocketing 80.1%. M-Pesa in international markets also played its part, growing 11.4% (normalised), although reported growth was comparatively flat at just 5.9%. Meanwhile, data traffic in South Africa rose by 36.4%, contributing to a 12% increase in prepaid data revenue.

Cloud, hosting and security services in Vodacom Business were another highlight, climbing 35.6%.

But despite such gains, these segments are still dwarfed by traditional prepaid mobile revenue.

A convenient disparity?

The reliance on normalised metrics isn’t unique to Vodacom, but the spread is wild: 11.2% normalised service revenue growth vs a 0.1% reported decline.

Yes, currency volatility across its African markets – especially Ethiopia, Mozambique and Egypt – distorts headline results. But the growing gulf between reported and normalised numbers invites scepticism, especially when the positive spin is reserved for growth areas aligned with Vodacom’s strategic messaging.

Notably, the company excludes forex losses, hyperinflation and M&A costs from its adjusted numbers – adjustments that rarely seem to cut both ways.

Hard truths about handset financing

That brings us neatly to the equipment revenue (read: mostly handsets sold on its platform) that grew 2.7% to R20.3-million.

This is the rug that hides the stains of business: Vodacom is aggressively expanding handset financing, particularly for prepaid customers – an area traditionally left out of device subsidy schemes. The company struck a R3.75-billion financing “arrangement” in 2024 to fund this expansion.

Joosub’s executive report confirms that the operator has “significantly scaled up our prepaid handset financing initiatives”, aiming to onboard the estimated 80 million non-smartphone users across Vodacom’s footprint.

Comparison, for context

Vodacom’s pivot to handset financing mirrors a broader industry shift.

MTN South Africa’s latest results show it generated R9.4-million in device revenue for FY2024. The group recently partnered with PayJoy to offer alternative financing models for smartphones, also targeting the informal market.

Cell C, is harder to discern because the Blue Label Group reports handsets, tablets and other devices through its subsidiary Comm Equipment Company (CEC). Group revenue in this category was R2.7 billion across its Africa distribution.

What distinguishes Vodacom is the scale – and the speed – of its financing rollout. While MTN is experimenting and Cell C is catching up, Vodacom appears all-in, targeting both postpaid and prepaid markets with the same strategy.

A telco by another name...

Vodacom wants to be seen as a forward-facing digital enterprise – a techco, not a telco. And in many respects, it’s getting there: 36.4% more data consumed, more cloud and security clients and nearly 18% normalised growth in financial services.

But the bulk of revenue still comes from simcards and handsets. And the fastest-growing segment? Not 5G, not AI, but what could be described, depending on your view, as a digital microfinance operation riding on the back of basic connectivity.

For consumers, the promise of affordable smartphones needs to be weighed against the risks of longer debt terms, higher total costs and potential credit blacklisting. For investors, Vodacom’s true health lies somewhere between its reported and normalised figures – neither of which tells the full story alone. DM