South Africa's mobile telecoms operator Vodacom Group (VODJ.J) upgraded its medium-term growth targets on Monday after completing its acquisition of a controlling stake in Kenya's Safaricom (SCOM.NR), while reducing its dividend payout ratio.
The Africa-focused company raised the target as it reported a 6.3% rise in first-quarter group service revenue to 34.3 billion rand ($2.1 billion), driven by strong growth in Egypt and the rest of its business on the continent.
Chief Executive Officer Shameel Joosub said the performance highlighted the benefits of the group's diversification strategy.
He said the completion of the acquisition of a controlling 55% stake in Safaricom, up from 35% previously, marked a "defining moment" for the company and significantly strengthened its long-term growth outlook.
Vodacom, which is majority-owned by Britain's Vodafone (VOD.L), raised its medium-term target for earnings before interest, tax, depreciation and amortisation and operating free cash flow growth to the early teens, from its previous target of double-digit growth.
The Safaricom transaction, effective June 30, also prompted Vodacom to upgrade its "Vision 2030" revenue ambition to more than 300 billion rand ($18 billion) from more than 200 billion rand previously.
Joosub said the consolidation of Safaricom would materially increase the scale of its financial services footprint, lifting the contribution of financial services to group service revenue to more than 22% from 13%.
The segment remained a key growth driver during the quarter, with service revenue rising 17.8% to 4.5 billion rand.
Service revenue growth of 32.8% in Egypt and 14% in the rest of Africa helped offset a more modest showing in Vodacom's South African market, though its domestic prepaid segment returned to growth in the quarter, the operator said.
As part of a broader review of its capital allocation framework, Vodacom also updated its dividend policy to a payout ratio of at least 65% of headline earnings from 75%.
($1 = 16.7093 rand)
