Shares of Vodacom, South African mobile phone operator, fell nearly 6 percent on Monday after it posted a surprise decline in first-half earnings and warned that earnings growth would be slow over the next three years.
South African telecom companies are battling to return the kind of double-digit margins posted over the last decade as competing firms cut voice and data costs to gain market share.
Vodacom, South Africa’s operator with the most users, lowered its medium-term outlook for earnings before interest, tax, depreciation and amortisation to mid-single digits from previous expansion forecasts of mid- to high-single digits.
Rival Telkom SA has warned that its earnings for the first six months would fall by up to 70 percent.
“It’s not a Vodacom specific story,” said Farai Mapfinya, head of equities and portfolio manager at JM Busha Asset Managers.
“The industry as a whole is actually going into a low returns environment. You are not likely to see the high margins that we have seen in the past and not likely to see high double-digit growth in terms of earnings for the foreseeable future.”
The local unit of Vodafone plc said its service revenue – which excludes income from non-core business such as mobile phone sales – took a 1bn rand ($89 million) hit after the sector’s regulator halved termination rates, the amount operators charge one another to connect calls, this year.
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Vodacom said diluted headline earnings per share, South Africa’s benchmark profit measure, fell 5 percent to 415 cents per share in the six months to end-September.
The operator that offers services across five African countries including Tanzania, the Democratic Republic of Congo and Mozambique said revenue from those countries grew 13 percent, contributing a quarter of the group’s service revenue.
Vodacom is the dominant operator in South Africa although dwarfed by rival MTN across the continent.
