Vodacom Group Ltd Ord

Hello and a very warm welcome to Vodacom's full year results presentation for the financial year ended 2022. We're going to kick off today's show with a video where Shamil and Rais Sebi run us through the strategic and financial review for the year. And then we're going to jump into some live Q&A, taking questions both from the audience that's with us today and also through the facility that's made available online. Whether you joined us in person or online today, thank you very much for your time and attention. We do value your support. With that, we'll kick off the video.

Welcome to our results presentation for the financial year ending March 2022. The past year is best described as being a transformational year for Vodacom. We made significant strides in our transition towards becoming a Pan-African technology company. In November last year, we announced two significant strategic acquisitions. Additionally, we are planning a commercial launch in Ethiopia in 2022. Our digital ecosystem was enhanced with the launch of our super apps. Collectively, these milestones provide scope for Vodacom to accelerate growth and returns over the medium term. My presentation is framed in three sections. Firstly, and most importantly, I will give you an update on our purpose-led business model, which drives our strategy. Some highlights for this year include our progress on the pillar of digital inclusion, where we now service 61 million financial service customers across the group. In our Inclusion for All pillar, we will increase our female representation of the board to 42% after our AGM. We are making good progress in our planet pillar with our greenhouse gas emissions per terabyte of data, which is down 16%. This was supported by our broad-ranging energy initiatives. Secondly, I will give you an update on how we are accelerating our multi-product strategy called the System of Advantage. Highlights this year include strengthening our footprint with a controlling 55% stake in Vodafone Egypt, one of Africa's premier telcos. This transaction is awaiting final regulatory approvals. The combination of our existing footprint with Egypt and Ethiopia means we will now reach a population of more than half a billion people. And with connectivity at the core of Vodacom, we announced the acquisition of a strategic stake in CIVH in South Africa, the leading fibre operator. This transaction will assist in narrowing the digital divide by enabling affordable high-speed access to connectivity. Further, the recent acquisition of 110 MHz of high-demand spectrum in South Africa provides critical certainty. Our R5.4 billion investment into spectrum will support network performance and contribute to the long-term sustainability of the industry in our largest market. Our digital ecosystem is integral to our system of advantage and is powered by big data with capabilities across financial and digital services and IoT platforms. In financial services and building on our foundation as Africa's leading fintech operator, we launched our Vodapay and Mpacer super apps. The super apps are critical to building out our two-sided ecosystem, which brings together consumers and merchants. I'm very excited by the high uptake rates in the short term since we launched our super apps. Separately, our IoT business is combining our global and local capabilities to build world-class products in medicine, agriculture, and smart infrastructure. Finally, I'm very pleased to announce a strong set of financial results today. Some of the highlights which Raisiba and I will unpack include a 4.5% increase in revenue to 103 billion Rand and a 4.6% growth in free cash flow generation of 15.7 billion Rand. Our final dividend is up 4.9% to 430 cents per share. This brings the full year dividend to 850 cents per share and attractive 6% yield. With a focus on future growth and to support our evolution from a telecommunications to a technology company, we invested 14.6 billion Rand of CapEx in the year. As we accelerate growth, we remain exceptionally focused on our returns profile. Pleasingly, return on capital employed increased by 1.4 percentage points to 23.4%, underlying our strong execution. The context in which we operate informs our purpose as a company. We are uniquely positioned to reach and empower millions of African consumers with our connectivity, digital and financial solutions. This is captured in our purpose-led model, which is to connect for a better future. It is premised on the three pillars of digital society, inclusion for all and planet. Again this year, we stepped up our efforts in the delivery of our social contract. We assisted governments and communities in Africa through the deployment of a wide range of tech for good solutions. These efforts help mitigate the effects of the pandemic and bridge the digital divide, as we recognize our ongoing duty to step up and make a societal difference. Together with Vodafone, we are honored to be part of the monumental initiative with the UN and the ITU to increase smartphone access to improve the lives of millions of people in Africa. As Vodacom works to connect the next 100 million African people through our Africa.Connect campaign, we look forward to supporting this ambition to ensure that no one is excluded from the global digital economy. In the KwaZulu-Natal region of South Africa, which has recently been ravaged by both social unrest and devastating flooding, Vodacom accelerated efforts to assist small-medium enterprises impacted by the economic fallout. we donated 10 million rand to help towards relief efforts. In Mozambique, we contributed to Mozambique's hashtag Hope for Parma campaign by providing food, shelter, and personal hygiene items. We reached close to 5,000 families displaced by conflict in the Cabo Delgado province. In the DRC, we launched a fund together with the Vodafone Foundation to support communities in the DRC devastated by the volcanic eruptions. In keeping with our continued efforts to combat COVID-19, the Vodafone Foundation and Vodacom donated R87 million to purchase vaccines and support vaccine rollouts to vulnerable people in hard-to-reach communities across our markets. This includes funding the delivery of cold chain units to the DRC, Mozambique, South Africa and Tanzania. Connected Pharma is a digital platform that improves productivity, revenue and resilience for small-scale farmers by connecting them to information, inputs, credit and buyers at scale. More than 230,000 farmers use Connected Pharma across our markets. These are just some of the initiatives we supported this year, but there are many more. We strongly believe that connectivity and financial services act as enablers of inclusion and economic growth, which is aligned with our purpose. Vodacom has a clear and powerful strategy that sets us apart from competition and will deliver superior returns to U.S. shareholders. We call our multi-product strategy the System of Advantage, and it has 10 drivers of success. The first two drivers relate to our core connectivity offering. Following the announced Egypt transaction, our footprint is further strengthened. In South Africa, our fiber deal enhances our connectivity offering in the market in a high margin segment. Delivering connectivity to homes and businesses is core to our business model and is something that we are passionate about. Leading market share positions in connectivity provide us with the platform to scale for our digital ecosystem. This ecosystem spans across financial and digital services, IoT, and big data. Our AI capabilities and behavioral loyalty programs enhance next best activities for customers. Strategically, this allows us to create a ring around the customer with the customer proposition so much more than just a decision based on price. A great example of this is in the enterprise space, where we are partnering with business to accelerate their growth. We are transforming the operations through digital technology in high growth areas like cloud, hosting, managed security, managed services and IoT. In the financial services space, we have built a formidable business across our existing markets with products that cut across consumers and merchants. Vodacom's success in this segment is a function of strategic focus. This focus has seen us continuously scale the breadth and value of our financial service products as we leverage big data, machine learning, and world-class tech such as Alipay. The recent launch of Vodapay in South Africa was a particularly exciting milestone for our financial service business. We are able to improve our offerings to customers through the big data insights we have from our world-class customer value management platforms. Today, we know about 3,200 attributes about each customer, up five-fold in a year. These insights are used to enhance offers supported by our behavioral loyalty, which cuts across our products. As we implement our system of advantage, we put an equal focus on strategic considerations to improve our overall customer proposition, return on capital employed, and value creation. A key part of this is optimizing returns. Our fiber deal in South Africa is a great example of this, where we are using the power of scale and shared costs to drive down the cost to communicate. Of all the elements in the slide, the most important for me is number 10. Our purpose-led model shapes our outlook and our business strategy as we connect for a better future. We have made major strides in accelerating our system of advantage this financial year. Earlier, I mentioned the Vodafone Egypt and South African Fiber deals and upcoming commercial launch of operations in Ethiopia. To give you a snapshot, post the acquisition of Vodafone Egypt, we will have over 64 million financial service customers and over 39,000 network sites. This will make us one of Africa's largest tower owners. The group smartphone penetration will be at 53%, highlighting the structural opportunity we have to grow in data. Our market-leading positions and scale provide us with the platform to deploy our digital ecosystems, expand our addressable market, and create product diversification. Speaking of digital ecosystems, we were very proud and excited to launch our highly anticipated Vodapay and M-Pesa super apps this past year. The apps build on our success in financial services to open up the ecosystem from a few partners to thousands of service providers. The Super App removes the barrier of physical limitations for both consumers and merchants, which help them to expand well beyond their geographical boundaries. And to put it simply, as a transactions compound, we will take our cut, a bit like an iOS or Google Play Store. Our IoT platforms are scaling quickly. In our February investor day, we showcased how we are providing solutions for smart medicine, agriculture and buildings. Also power saving products for infrastructure assets such as base stations. IoT in our markets is an attractive addressable market of 30 billion rand. Our platforms enhance our Vodacom business system of advantage and positively impact on our purpose pillars. Our focus on value creation was evident in the improvement in return on capital employed in the year. We see further scope to optimize our capital, including our infrastructure assets. We are progressing well with the separation of our towers in South Africa to support this journey. Sharing infrastructure in our markets is a key driver in our future-ready tech co-ambition and we are focused on our fibre deployment and open access ambitions. Pulling these major strategic developments together, we believe we will enhance our growth and returns potential as a group. Vodacom seldom does major M&A as we have a very high benchmark for the assets we target. The Vodafone Egypt and CIBH deals offer unique opportunities to advance our strategic connectivity and financial service ambitions. Vodafone Egypt is a clear market leader with an attractive asset portfolio of Towers and Spectrum. Their financial results this year were excellent with a 17.3% growth in revenue to an equivalent of R31.2 billion. EBITDA growth was up 22.3%. Vodafone Egypt's growth outlook is supported by leadership across both the consumer and enterprise segments, a clear network in spectrum advantage versus peers, and a brand synonymous with technology leadership. In addition to being an attractive asset on a standalone basis, we see a massive addressable market for financial services in Egypt. We intend to leverage our financial services product roadmap, including our super app approach, to unlock this opportunity. We also see upside from cross-pollination between Egypt's software factory and our big data capabilities, close to cooperation between both companies by scaling pan-African enterprise and IoT solutions and also talent sharing. As we evolve from telco to techco, access to skills talent is critical. Egypt is seen across the Vodafone group as a talent and IT skills powerhouse. We look forward to closing the transaction in the near term, although this is subject to a regulatory sign-off. Separately, also on the 10th of November, the group announced a major step forward in scaling our fiber offering in South Africa. Through an investment into Vumatel and Dark Fiber Africa, Vodacom will gain exposure to highly attractive and fast-growing businesses and South Africa's largest open-access fiber players. With our initial cash and asset injection, we expect to acquire a co-controller Vumatel and DFA and a stake of up to 40%. On the connectivity front, we always target scale. Vumatel passes 1.3 million households in South Africa and has around 40% market share. When combined with our fiber to the home assets and our cash injection, we will accelerate the scale of this business into something that can really benefit South Africa. The open access business model is a key part of this, and as Vumatel rolls out into secondary towns and lower income groups, we will help close the digital divide. Scale and a shared cost model combine particularly well for our DFA investment. As we move into a 5G world, the fiber rollout of DFA and Vumatel will help us optimize our costs as we benefit from our sharing, especially in areas like fiber to the base station. This asset optimization is great news for reducing the cost of producing data. Turning to the group's financial results, group revenue grew 5.8% and service revenue grew 4.6% on a normalized basis. The growth was supported by resilient performance in South Africa in our new services such as IoT and financial services. The group's operating profit grew by 5.4% on a normalized basis to R28.2 billion. We added 6 million customers this year across the portfolio to serve a combined 130 million customers across the group. Our financial services business is integral to our purpose-led model and is the largest component of our new services and a clear strategic priority. Financial service customers reach 61 million in the year, up 5%. This customer growth rate was achieved despite 1.3 million M-Pesa customers in Tanzania relinquishing services immediately following the introduction of new mobile money levies in July 2021. In building resilience of our networks to cope with significant increases in mobile data traffic volumes, we invested R14.6 billion into capital expenditure across the Varucom Group markets. This represents 14.3% of revenue and is in line with guidance. Headline earnings per share increased 3.4%, supported by the Group's operating profit growth. The board resolved to declare a final dividend of $430 per share, up 4.9% from last year, bringing the full-year dividend to $850 per share. Vodacom's geographic and revenue diversification continues to pay dividends. Pleasingly, we delivered growth across each of our segments. On the service revenue bar chart, normalized group service revenue was up 4.6%, with South Africa growing 3.8%. Our international operations delivered normalized service revenue growth of 5.6% despite the impact of levies in Tanzania. Safaricom had an excellent year with service revenue growth of 12.3%. From an operating profit perspective, our international operations grew 11.8% on a normalized basis. An excellent result. Our associates and joint ventures grew at 17.5% supported by another great year for Safaricom's business in Kenya. When looking at our customers, 65% of our 130 million customers are outside South Africa. This split will increase further as we add Egypt's more than 40 million customers into the portfolio. Shifting to a product lens, this slide sets out the contribution of our high-growth new services to each of our geographic segments. Our new services comprise IoT, fixed financial, and digital services. These services follow a similar product lifecycle. This starts with innovation, which is driven by dedicated innovation hubs and is data driven. Services are then integrated into our product ecosystem and system of advantage and scale to support our growth ambitions. Optimization phase for assets can take different forms. It could include structural separation and potentially partial monetization to better reflect the underlying value of these assets. In South Africa, 14.4% of service revenue is now attributable to new services. We intend to scale each of these new revenue streams into formidable businesses. Across our international portfolio, the contribution of new services is closer to 28%, while Safaricom sets the benchmark at 42.5%. Earlier, I mentioned that we have built a formidable financial service business. This slide sets out the matrix that highlight our scale. Revenue for our consolidated operations exceeded R7.6 billion in the year, up 14.4% on a normalised basis. Adjusting for the mobile money levels in Tanzania, the normalised growth was an even more impressive 23.4%. Safaricom generated M-Pesa revenue of 14.5 billion rand on a 100% basis. Growth was up 30.3% as it implements our two-sided financial services ecosystem. More on this later. Our M-Pesa platform, including Safaricom, processed a staggering $324.6 billion of transaction value during the year, up 29.2%, representing clear leadership in the African fintech space. We've also provided some color on a proportionate basis, which accounts for minorities and associate holdings. This is especially relevant when comparing fintech valuations to market cap. On a proportionate basis, we generated 11.2 billion rand of revenue in the year. This equates to 13% of proportionate service revenue. The low capital intensity profile of financial services means that it generates a higher profit margin than our core mobile business. 17% of our group's proportionate profit before tax comes from financial services at a margin of around 40%. This equates to 4.4 billion Rand or $300 million for the year. To capture more share of the addressable FinTech market, we need to lead in the digitization of financial services in Africa. We are doing just this and have developed a comprehensive suite of financial products, which provides a compelling proposition to both consumers and merchants. We see the merchant play as a critical part of the fintech value chain. Our enterprise resource planning tool called Vodatrade facilitates transactions between merchants and FMCG operators. On the payment side, we have launched our own Android-powered physical point-of-sale device in South Africa, complementing our already scaled M-Pesa TIL service. This payment ecosystem provides insurance and lending opportunities such as invoice financing and SME lending. Pulling our merchant and consumer capabilities together and launching them into the next realm is our super app approach. Our South African lifestyle super app Vodupay is supported by the world-class technology of Alipay. It offers services ranging from loans, seamless QR codes and person-to-person payments to entertainment and personalized shopping experiences with many more services such as savings and investments on the product roadmap. This functionality will be replicated across our M-Pesa footprint supported by many app capabilities on the Alipay platform. Digging a little deeper into the ecosystem of both financial services in South Africa and M-Pesa Africa, this slide shows some of the highlights from the past year. On the merchant side, we have 550,000 active M-Pesa merchants who have processed $14 billion worth of transactions across the platform last year. In South Africa, our voter trade product processed $270 billion of transactional value during the year. Looking at the super apps, our M-Pesa app has 28 mini apps on the platform with 2.8 million active users. I'm particularly excited about Vodopay's high adoption rate since its launch in South Africa in October last year. This super app has attracted 2.2 million downloads and 1.6 million registered users in a very short time. The app is zero-rated and hosts a number of South Africa's leading retailers in the 85 mini-apps that are currently registered on the platform. I am proud to say that value-added financial services have been launched across our entire footprint. When I refer to value-added services in this context, it includes products like insurance, savings and lending, so growth areas are over and above our core payments. A fantastic example of the adoption of M-Pesa is in Tanzania, where 20% of our M-Pesa customers are already using a value-added financial service. In South Africa, our insurance business is growing nicely, with insurance policies now at 2.4 million, up 15%. From a growth perspective, one of the big drivers for M-Pesa is international money transfer, where around $4 billion of value was processed this year, up 57%. On the Vodapay side, cash in and cash out is planned for this year and will accelerate the transactional use case for the platform. The addressable market opportunities across our footprint are very exciting. These are set out on the right-hand side of the slide. Looking ahead, we see strong growth potential for customer adoption across our existing footprint, and we are targeting 75 million financial services customers by FY25. To enhance alignment between our purpose and strategic execution, financial inclusion forms part of management's long-term incentives. Over and above this, Egypt and Ethiopia, each with populations of over 100 million people respectively, provide transformational opportunities for financial services. In South Africa, revenue reached R80.8 billion in the financial year, up 5.3%, supported by strong equipment sales. Service revenue grew 3.8% to R58.5 billion, driven by continued demand for connectivity, incremental wholesale revenue, and growth in our new services. Data traffic was up 19.2% in the year and accelerated to 24.3% in the fourth quarter. We added 1.8 million data customers, reaching 23.5 million customers, up 8.2%. Smart devices were up 13.1% to 26.2 million. While strong growth was evident across all our segments, Vodacom Business is worthy of a special mention with service revenue up 11.6% to R17.7 billion. This was driven by our wholesale business, continued demand for innovative work-from-home solutions, and sustained growth in fixed-line services. Financial Services delivered another strong year of growth with revenue up 12.4% to R2.7 billion. The growth was underpinned by our Airtime Advanced product, where we advanced R13 billion in airtime during the year. EBITDA grew 3.3% and was impacted by a few factors that Ricey Bear will unpack in more detail. Notably, we accelerated spend on technology OPEX during the year to support improved resilience of the network. This investment into the network was very deliberate and supported a leading network NPS score at the end of the year. Looking ahead, our R5.4 billion investment in the spectrum will support network performance and coverage. In addition to accelerating our rural coverage program and fast-tracking the rollout of our 5G network, access to a high-demand spectrum will result in even faster data connectivity. This will ultimately assist in delivering greater value for customers who have already benefited from a 43% drop in headline data prices since 2020 and our R50 billion investment into infrastructure over the past five years. Service revenue for our international business increased 0.3% to R22.2 billion, subdued by a strong rand in the impact of new levies on mobile money in Tanzania. The levies diluted revenue by R708 million in the year. On a normalized basis, service revenue grew 5.6% and adjusted for the mobile money levy impact grew by 9%. The strong underlying growth reflects our purpose-led focus on digital and financial inclusion, with normalized data of 16.4% and M-Pesa revenue growth of 15.5%. Data revenue at 4.6 billion rand contributed 20.7% of international service revenue. We added 531,000 customers to end the year at 21.2 million, subdued by the barring of customers in Tanzania. Data traffic growth of 31.4% was supported by smartphone penetration increasing 1.4 percentage points to 33.7%. We continue to drive the adoption of smartphones, leveraging our strategic partnerships and implementing innovative financing options to provide affordable devices to our customers. A PESA revenue of R5 billion contributed 22.3% of service revenue. Growth was supported by strong performances in the DRC, Mozambique and Lesotho. Adjusting for the impact of the mobile money levies in Tanzania, a PESA revenue for international markets was up an excellent 29.5%. The underlying momentum of M-Pesa reflects our ongoing product enhancements supported by our innovation hub M-Pesa Africa. International EBITDA was R8.5 billion and declined 3.2% on a reported basis, negatively impacted by a once-off lease accounting impact in the DRC and the mobile money levies in Tanzania. Adjusted for the lease and levy impacts, international EBITDA was up 11.3% and reflected accelerated cost containment initiatives, particularly in Tanzania. Operating profit was more reflective of the underlying profitability performance across international. Reported operating profit for the segment was up 13.5% to R4.4 billion. Safaricom delivered another strong set of results supported by excellent growth in the fixed business and growth in M-Pesa. In local currency, service revenue grew 12.3%, supported by data revenue growth at 8.1% and M-Pesa revenue growth of an excellent 30.3%. M-Pesa's revenue growth was supported by strong product adoption and greater value through updated peer-to-peer pricing from 1st of January 2021. Abesa customers grew 7.8% to 30.5 million. Fixed service revenue grew 18.3%, supported by fiber-to-the-home customers, which grew 20.8%, while enterprise fixed customers grew 24.1%. The strong revenue performance supported 14.9% EBITDA growth in Kenya, with margins expanding to 51.7%. Reported EBITDA, including Ethiopia's startup losses, was up 11.1%. Safaricom Ethiopia is proceeding with its plans for operational readiness and we expect commercial launch in calendar year 2022. This will unlock a long-term growth factor for Safaricom. Our approach to ESG is an integral part of our purpose and strategy. This year, the outcomes of our purpose-led model and strong governance were recognized by leading environmental, social, and governance rating agencies, including MSCI and Sustainalytics. In November last year, MSCI rated Vodacom as AAA, its highest ESG rating. MSCI highlighted Vodacom's scores in governance, labor management, and cybersecurity policies as the key drivers of the ESG rating given. Separately, in October last year, Sustainalytics ranked Vodacom first out of more than 200 companies in its telecommunications service industry grouping. Our approach to ESG is premised on the core pillars reflected on this slide, with our purpose of connecting for a better future being the first pillar. Our social contract is the guiding ethos to our purpose initiatives. Underpinning responsible practices, which is the third pillar, involves our steadfast commitment to operating at the highest standards of integrity and ethics. Included in this pillar is our commitment to protecting our customers' privacy, our people's health and safety, and human rights. The fourth and final pillar is premised on the transparency in which we conduct our business and the measurement thereof. Measurable ESG data is increasingly relevant to all our stakeholders, including lenders and ESG rating agencies.

In this video, I will unpack our results for the year ended 31st March 2022. We are pleased to have delivered good results for the year and know that they are consistent with our medium term targets while continue to deal with the tail impacts of the COVID-19 pandemic. From a shareholder perspective, we have declared a final dividend of 430 cents per share representing growth of 4.9%. This is testament to our ongoing operational execution and the financial position, both of which are a good context to navigate us through the ongoing uncertainties of the macroeconomic environment. Moving to our financial performance for the year ended 31st March, our income statement sets out reported and normalized growth. I will primarily draw attention to the normalized growth numbers, which provide better insights adjusted for forex fluctuations, M&A activity, as well as major one-offs. Pleasingly, reaching 100 billion rands for the first time, our revenue increased by 4.5% or 5.8% on a normalized basis, supported by service revenue growth, which was up 3% on a reported basis and 4.6% on a normalized basis. EBITDA grew 2.1% on a normalized basis at a margin of 38.8%. The EBITDA performance was supported by the South African business, while the international business was impacted by foreign exchange headwinds and a handful of one-offs, which I will unpack later. The reported change on the net profit from associate and joint ventures of 3.1 billion rands was impacted by foreign exchange and startup losses in our new operations in Ethiopia. On a normalized basis, Safaricom's contribution to our operating profit increased 17.5%, reflecting a strong performance in M-Pesa following a period of zero rating P2P transactions. Headline earnings per share increased 3.4% to 1013 cents and was achieved despite foreign exchange headwinds, startup costs for the investment in Ethiopia and the impact of mobile money levies in Tanzania. As set out on the previous slide, normalized service revenue growth for the group was 4.6% for this financial year. On a quarterly basis, group growth has eased modestly from 4.4% in the third quarter to 3.2% in the fourth quarter. South Africa delivered a good quarter-on-quarter growth, but we did lap a particularly strong fourth quarter in the competitive period. The base included the impact of lockdown restrictions and a new wholesale deal. Encouragingly, the absolute service revenue in the fourth quarter marked the highest in the year. Shifting focus to the international business, the impact of foreign exchange volatilities is evident, reflecting an opposite swing between the first and the second half. On average, the RAND was 15% stronger than a basket of currencies in our international markets in the first half, compared with the 4% weaker in the second half. The normalized growth trend reflects the reinstatement of P2P mobile money fees across our markets since January 2021. Further, the introduction of mobile money levy in Tanzania in July 2021 had a material negative impact on service revenue growth in the international business. The levies impacted Tanzanian service revenue by around 708 million rands. Adjusted for this impact, our international business would have grown service revenue by 9% for the year. Moving to EBIDA, group EBIDA grew by 2.1% on a normalized basis. South Africa posted EBIDA growth of 3.3% with margin contraction of 0.8 percentage points. Growth was impacted by normalization of certain operating expenditures such as publicity, as well as the accelerated spend on technology operating expenditure to support improved resilience of our network. Pleasingly, this intervention supported a market leading network NPS position, which we achieved by year end. Finally, for South Africa, the EBITDA margin was impacted by strong growth in low margin equipment revenue. International business EBITDA decreased 0.6% on a normalized basis with the margin contracting 1.4 percentage points. This performance was materially impacted by the mobile money levy in Tanzania and a one-off lease contract separation in DRC, which I will unpack in the next slide. In this slide, we unpack the effect of two material factors that diluted our EBITDA growth. On the left side, and starting with Group EBITDA, normalized growth of 2.1% was negatively impacted by the one-off lease contract separation that increased operating expenses and reduced the right of use depreciation and interest. The lease contract separation did not have a material impact on group net profit, however, diluted group EBITDA growth by 1.6 percentage points. Additionally, the introduction of levies on mobile money transactions in Tanzania negatively impacted group EBITDA growth by 1 percentage point. Adjusted for the one-off lease contract separation and the mobile money levy impacts, normalized group EBITDA was up 4.7%. On the right-hand side of the slide, we provide the same analysis but for international EBITDA growth. Adjusting for the lease contract separation and mobile money in Tanzania, international business growth was 11.3%. This rate of growth represents margin expansion and was supported by accelerated cost containment, particularly in Tanzania. Shifting focus to cash flow, operating free cash flow increased 1.6% in this year. We made a strategic decision to accelerate investment into network performance, taking advantage of the strong rents purchasing power, particularly in the first half of 2022. This trend continued in quarter four in an attempt to mitigate some of the potential supply chain challenges that may emerge as a result of the Russia-Ukraine conflict. Our capex of 14.6 billion rands increased 10% as a result. Least liability payments, which is also captured in operating free cash flow, amounted to 4.2 billion rands. From operating free cash flow, we paid cash taxes and finance costs, but these were partly offset by the dividend received from Safaricom. On this basis, we generate free cash flow of 15.7 billion rands, up 4.6%, broadly consistent with our net profit growth. Herbs increased 3.4% to 1.013 cents per share. As discussed earlier, this result was impacted by a few notable headwinds. The most significant of this related to the setup losses in Ethiopia. This losses comprised both operating expenses and finance costs that were incurred and impacted headline earnings per share by 22 cents per share. The mobile money Tanzania levy had a 225 million rents impact on the bottom line and it equates to 13 cents per share. From an operational perspective, this means that underlying growth in HEPs was around 69 cents per share. The adjusted growth, excluding the one-offs, is 7%, and we are pleased with this growth given the foreign exchange headwinds in the year. Vodacom's current dividend policy is to pay at least 90% of adjusted headline earnings, excluding Safaricom, and then pass through the Safaricom dividend. On this basis, the board has declared a total dividend of 850 cents per share and a final dividend of 430 cents, which is up 4.9%. The final dividend of 430 cents per share comprises 365 from the controlled operations and 65 cents from Safaricom. The Safaricom contribution declined because foreign exchange rate movements and the free P2P transactions in the prior year had an impact on this number. The contribution from the controlled operations was up 9% and this is despite the impact of the Tanzanian levies and this was reassuring. Our balance sheet remains one of the key strengths and it positions us to accelerate our system of advantage. Our near-term debt increased due to upcoming maturities of debt with Vodafone Luxembourg. We do not foresee any refinancing risk related to these borrowings, some of which is already in progress. More than 90% of our debt, excluding leases, is rent-based, limiting our exposure to foreign exchange movements. From an interest rate perspective, our debt structure is split 52% fixed and 48% floating rates. And if we exclude losses and focus on financial debt, the fixed component is 35%, while floating rate debt is 65%. We intend to optimize this mix of debt as we undertake future funding obligations, such as the Vodafone Egypt, CIVH, as well as the Spectrum acquisitions. Pleasingly, we have maintained our net debt to EBITDA ratio at 0.9 times year-on-year despite our accelerated network investment. And now, on our medium-term targets. We aim to grow service revenue in mid single digit and EBITDA at mid to high single digits. Our group capital intensity ratio remains in a range of 13 to 14.5% of revenue. With this guidance, we have updated our profitability target metric from group operating profit growth to group EBITDA growth. This reflects the anticipated Vodafone Egypt transaction, which is expected to meaningfully diversify the group's geographic profile. As a result of the transaction, we anticipate an increased contribution from the controlled operations to group profitability. Notably, this guidance excludes Egypt and it is based on the prevailing economic climate. Clearly, both the COVID-19 situation and the war in Ukraine pose material risks to the outlook for inflation and growth across our markets. While we are optimistic that our strategy and business model are resilient, we are also realistic that the cost of living is a challenge and that we need to overcome this with our customers. Finally, we expect the Vodafone Egypt and the CIVH fiber asset acquisitions will enhance our system of advantage and provide scope to diversify and accelerate our group growth profile. Once we close the Vodafone Egypt transaction, we intend to provide an update on guidance at our next reporting event. In my concluding slide, I would like to reconcile our medium-term target with the shape of our business in years to come, and in particular, our ambitions around new services. These new services encompass digital and financial services, fixed and IoT, and are key to us diversifying our revenue portfolio and improving our customer proposition. On a consolidated basis, with South Africa and international business in scope, we see our new service revenue contribution increasing from 18% to around 25% to 30% in the medium term. On that exciting note, I will conclude and thank you for your attention.