South Africa-based Vodacom Group said continuing data demand and squeezing more out of growth markets are both key to future revenue growth, but the strategy is not without its challenges.
The company’s projection came as it reported results for the 12 months to end-March 2016, starring a 7.5 per cent increase in revenue to ZAR80.1 billion ($5.2 billion).
However, the 2015 revenue figure was restated lower as the company changed how it treats handset finance costs. Net profit grew by 3.2 per cent to ZAR12.9 billion.
Revenue growth was bolstered by data revenue (up 32 per cent) and Vodacom anticipates this will persist in the coming year, as smart devices become more accessible, content more relevant and 3G/4G networks expand.
Supporting future growth will require access to sufficient amount of spectrum, the company said. Vodacom was forced to drop a bid for Neotel, which would have yielded more airwaves, under regulatory pressure. The group said it will explore other options.
The group also has faith in growth activities, such as driving greater contribution from its international markets. In addition to South Africa, its footprint includes Democratic Republic of Congo, Lesotho, Mozambique and Tanzania. Collectively international operations only account for just over one quarter of total revenue at present.
Other options for growth include getting more into the enterprise space, as well as expanding M-Pesa, insurance and the Internet of Things (IoT).
The prospects for M-Pesa suffered a blow a week ago when Vodacom was forced to discontinue the money service in South Africa because of disappointing take-up.
The company also cautioned on the hopes for general growth, citing macroeconomic factors at home threatening to dampen growth. In its international markets, regulation around customer registration will continue to hinder growth. It also warned on adverse currency movements.
Despite its warnings, the company believes demand is sufficiently resilient to overcome these barriers. It upgraded its three-year target for service revenue growth from low-single digit to low to mid-single digit. Ebitda will grow from mid single digit to mid to high single digit over the same period.