Telecom records substantial profit amid competitive pressures, local and global market dynamics. Vodacom Tanzania finance director Hilda Bujiku went into the detail during a recent conference call.
Telecommunications provider Vodacom Tanzania recently released its preliminary results for 2023, showing a positive turnaround, with the company transitioning from significant losses in 2022 to a substantial profit of over 200 percent in 2023. This impressive growth has been attributed to the recovery in mobile data, as well as the government's reversal of transaction levies. Additionally, the company has identified new revenue growth areas, such as lending, insurance, international money transfers, and merchant services.
During a conference call on the results, Hilda Bujiku acknowledged the impact of the deferred tax asset on Vodacom Tanzania's net profit after tax in the 2023 financial results.
This boost resulted from the improved medium-term outlook of the GSM (voice, SMS, and data) business, which had previously incurred significant losses. The separation of M-Pesa Limited as a separate entity allowed for the recognition of the deferred tax asset. However, when excluding this effect, the underlying performance and normalisation of the impact of levies revealed a net profit of TSh 5.6 billion. This represents a remarkable achievement, considering the company's previous loss of TSh 20 billion.
According to Hilda, Vodacom Tanzania expects to sustain profitability, assuming a stable macroeconomic environment and relying on an excellent strategy execution.
She noted that the company has diversified its revenue streams beyond traditional mobile services and product ranges, positively impact the lives of Tanzanians by providing essential financial services.
“There are various opportunities in order for us to continue monetising further from what we have started. Hence, we believe we will sustain this going forward. And that is what is in our LRP and the guidance that we have given, that we are expecting a mid to high single digit service revenue growth over the medium term, as well as supported by investment in the network, which ranges between 13 percent and 16 percent of revenue, which is a solid kind of investment and commitment,” she added.
Hilda also expressed confidence in the resilience of the telco’s diverse business portfolio, notably M-Pesa.
“Remember, the telco industry is very capital-intensive, not only from the investment side, but also from the maintenance side,” she said.
“Nevertheless, the cost saving initiatives have been massive in terms of muting the impact of the increase in cost. it is our mission to improve on the margins, which then will improve on the profitability,” she added.
Hilda took the opportunity to explain that competitive pressures and local market dynamics also contributed to margin challenges.
“We sell starter packs. The shortage of the chipsets has led to an increase in cost. Equally, in terms of the starter packs, as well as in terms of the smartphones that we were selling, which had also impacted the volume that we were selling from our own shops. But of course, the competitive pressure as well,” she said.
“When the marginal tax rate goes down, it brings in the pressure. And of course, this is locally induced pressure between the mobile network operators. So, if the market becomes stable, as well as the global headwinds, if it was also not extreme to the way it has come into that extreme, definitely the margins would have been better,” she noted.
Hilda explained that as Vodacom Tanzania is the only listed telecommunications company on the Dar es Salaam Stock Exchange, there is a lack of direct industry comparisons.
However, she said that “desktop research” suggests that the company is growing slightly faster than its counterparts.