Vodacom Group Ltd Ord

Welcome to the Vodacom Group Limited results conference call for the year I ended, 31 March 2024. Vodacom Group CEO Shamil Jusub will host the conference call. Before I hand the call over to Shamil, I would ask that you refer to and familiarize yourself with Vodacom's forward-looking disclaimer. This is set out on slide 40 of the annual results presentation and can be located on www.vodacom.com. Alternatively, if you would like a copy of the results announcement or presentation sent to you, please email Investor Relations website, vodacomir at vodacom.co.za. Shamil, over to you, sir.

Thank you. Good afternoon, everyone, and good morning to those joining the call from the U.S. I'm joined by Group CFO Raisi Ben Morati, as well as our Head of Investor Relations, J.P. Davids. Vodacom is celebrating our 30th anniversary and as I reflect on our journey over the years, I fall with a profound sense of gratitude to have been part of the Vodacom growth journey. We now reach more than 200 million customers across eight countries through innovative digital and financial services with the power to change lives. While I reflect proudly on our milestones over the past three decades, It is our ongoing purpose to connect for a better future and drive inclusion that fuels my passion to lead this company. This year, we simplified and evolved our purpose to focus on empowering people and protecting the planet. This is underpinned by our commitment to act with integrity in everything that we do. Under each of these pillars, we have clear actions. For example, we focus on people through closing the digital divide, which means access to smart devices, our education platforms, smartphone penetration, rural coverage, our Code Like a Girl program, empowering our customers and supporting communities. We protect the planet through our net zero ambitions and driving circularity and biodiversity. We will provide details of each of these initiatives in our ESG report, which we publish in June. Out of that, I wanted to mention our initiatives that made a difference in financial year 24. With connectivity at our core and supported by innovative new rural funding partnerships, we are closing the digital divide. This year, we rolled out an additional 2,300 4G base stations across our markets. Our smartphone strategy has several elements to drive inclusion. It combines local assembly with groundbreaking new prepaid and financing model that we have piloted across several markets in the year in which we intend to scale in FY25. Our impact on financial inclusion is evidenced by the 11.8% increase in financial service customers to 78.9 million customers. as we now process more than 1.1 billion US dollars of transaction value every day. Once financially included, we provide customers with an ecosystem that deepens their access to financial services with products like international remittances, global payments, bill payments, savings, lending, and insurance. Beyond our effort to drive digital and financial inclusion, we leverage our Tech for Good platforms to develop solutions across critical verticals, including education, healthcare, and agriculture. In education, our digital solutions facilitate access to quality educational resources for more than 4 million learners in our markets. In Egypt, our partnership with government to digitize the country's healthcare system reaches more than 300 hospitals and serves more than 6 million people across Egypt. Given the importance of agriculture in Africa, our businesses, Mezzanine, M-Pesa, and IoT.Next, enhance productivity through the efficient distribution of inputs, access to insurance and funding, connecting farmers with buyers, and facilitating payments and subsidies. Mezzanine's eWUNA, MyFarmWeb, and eVouchering solutions now reaches over 6 million beneficiaries. We also continue to partner with governments to support the technology-based affordable emergency transport system known as Air Mama in partnership with the Vodafone Foundation, which is expanding beyond Tanzania. To further empower people, we aim to positively impact communities where we operate. Our Code Like a Girl program promotes women empowerment through technological inclusion and reaches almost 16,000 young women. In the DRC, our I'm Capable program helped 1,450 women living with a disability to become our M-PESA agents. For the planet, we have committed to net zero for scope one and scope two by 2035 and submitted our ambition for verification in terms of the science-based targets initiative. We will fulfill this commitment by re-imagining problems to create inclusive opportunities. Our virtual wheeling deal is a prime example of this mindset and a blueprint for other South African corporates to accelerate the country's energy transition. Pleasingly, our progress on ESG was again recognized by leading rating agencies in this financial year. We retained our ESG leader AAA rating from MSCI. We were also proud that Vodacom was recognized for leadership in addressing climate change and was awarded an A- rating in the latest CDP climate change assessment. In my presentation this morning, I also provided a look back from where we've come from and a look forward to where we are going. Our vision 2025, powered by our strategy, the system of advantage, has evolved from the acquisition of Egypt and Ethiopia to creating healthy markets. We have diversified and scaled new services, especially financial services, while also investing significantly in world-class big data technology to enable a deeper understanding for our customers. With a year left, In current strategic cycle, our group's revenue has surpassed R150 billion. Our customer base is evenly split across our geographical segments, and we now manage the business in four segments, namely South Africa, Egypt, our international portfolio, and Safarico, each comprising around 50 million customers. That showcases the breadth of our footprint, which covers more than half a billion people across the continent. Our Beyond Mobile or new services, which includes digital and financial services, fixed and IoT, contributes 20% of group service revenue, as we also advanced our product diversification. As Africa's leading fintech operator, we process more than $100 billion in the quarter, so annualizing at a rate of $400 billion. Our transaction volume of $33.7 billion means that we do almost 100 million transactions a day. These outcomes were delivered through a period characterized by economic volatility. This year, we faced heightened geopolitical tensions, supply chain disruptions, high inflation in interstates, energy uncertainty, and foreign exchange repressions, including a 40% devaluation in the Egyptian pound in March. These factors have taken a toll on our bottom line in the current year, but not on our strategic ambitions. As we look past 2025 into the next phase of our strategy, we will focus on the sustained growth by amplifying our commitment to purpose and customers, strengthening the fundamentals, innovating for growth as we continue to scale our new services beyond mobile. And embracing digital transformation. Core to this outlook will be accelerating mobile and fixed connectivity, scaling and financing and deepening digital and financial inclusion in all our markets. We also intend to expand our partnerships to power our growth, increase the rural and fiber connectivity, and expand the reach of our Tech for Good platforms. As we execute in the next phase of our strategy, we see continued growth of our connectivity and financial service customers. We expect to exceed 230 million customers and 100 million financial service customers by FY2027. This customer growth provides the foundation for our upgraded high single-digit service revenue growth target. In addition to our progress on purpose and strategy, I'm also pleased to provide an update on our financial results. This was a year characterized by strong commercial momentum, despite facing several precarious economic headwinds, including a 20% higher effective interest rate and foreign exchange rate pressures. At a group level, our financial highlights included Revenue of 151 billion rand, up 26.4%. On a pro forma basis, including Egypt in both years, revenue growth was up 10.1%. This is the highest rate of constant currency growth for the group in many years. Group service revenue growth was up 29.1% or 9.2% on a pro forma basis and pro forma and target comparable basis. This was at the high end of our medium term target range. Our key growth drivers were data revenue and new services, including financial services. Data customers, including Safaricom, reached 106.4 million, while data traffic growth accelerated to 38.5%. Group EBITDA increased 24.3% to 56.1 billion rand, impacted by material foreign exchange trading loss of 1.6 billion. On a group-performer basis, EBITDA growth was 7.8% in line with our medium-term expectations. Our headline earnings per share decreased 10.8% to 846 cents per share. Disappointingly, this result did not reflect our strong commercial momentum. Headline earnings was impacted by foreign exchange rate losses To put into perspective, we had a $1.6 billion loss on Egypt and $400 million on the repatriation of dividends, so $2 billion in impact hitting headline earnings per share. Startup losses in Ethiopia, higher interest rates, and a prior year deferred tax asset recognized in Tanzania. Together, higher interest rates and bond exchange losses resulted in a headwind of almost $0.150 per share. The board declared a total dividend of 590 cents per share, consistent with our pay operation approach and reflective of the pressure on headline earnings. At a product level, new services contributed 20% of group service revenue, moving closer to our target of 25% to 30% in the medium term. Financial services delivered growth of 32.2% or 19.9% on a pro forma basis, including Egypt, as we continue to scale user adoption, new products and services. Our super apps are scaling nicely across the group with almost 5 million Ebesa users adopting this channel. In South Africa, our super app, Vodapay, reached over 10 million downloads. During the year, we merged our telecom app MyVodacom into Vodapay. This is supporting good growth in transacting users in Vodapay. In Egypt, Vodacash is integrated into our NRVodafone app, and the go-to mobile wallet in the country put customers up an impressive 52% to 8.2 million. Focused to South Africa, service revenue grew 2.6% to $61.6 billion, supported by consumer contract, prepaid data, and new services. While the contract was up 3.9%, supported by a more-for-more pricing increase in 125,000 new customers. For business, excluding wholesale revenue, it was up 3.4%. The modest growth reflects that corporate customers were recalibrating spend as employees returned to their offices. Our prepaid segment grew 1.7%, subdued by the challenging macro backdrop. Recently, prepaid data grew by 11.6%, supported by our network investment. Data matrix remained strong, with data traffic up 36.2%. New services were up 11.2% and contributed 16.6%, or $10.2 billion of South Africa's service revenue. Financial services revenue increased 7.9%, underpinned by insurance revenue growth of 13.8%. Managed alongside financial services, our digital service portfolio had a strong year, up 13.6% to 1.6 billion rand. EVRA grew by 0.7%, impacted by pressure on wholesale revenue and higher network operating costs associated with increased electricity prices, credit availability challenges, and security costs. Egypt had an excellent deal.

For questions after the presentation, if you wish to ask a question, please press start in one. If you wish to withdraw your question, please press start in two.

...as well. Further growth was also achieved in waterfall cache, which grew over 107%. Customers reached 48.3 million out of 6.2%. It was another driver of growth. Data matrix was strong in Egypt. Data traffic was up 41.8%. It's supported by a 10.9% increase in customers to 20.9 million data customers. called cash revenue more than doubled and increased its contribution to service revenue to 6.5%. Egypt contributed $13.1 billion to group EBITDA for 23.3%. The 400 result was impacted by a 40% currency devaluation in March. Extending this impact, EBITDA would have been 14.5 million, up almost 40% in local currency. This trend reflects excellent growth in a high inflation environment growth involved from cash, including fee income on deposits. That income growth in local currency was axed at 53.7%, with the foreign exchange's impact offset by lower growth, depreciation, and higher net income. This level of net income growth meant that even in hard currency, the versus grew in FY24, despite the devaluation in March. In euros or upon each of net income, it was 6% higher than the figure at 1.23, and in lanes, it was 22% higher. Our international operations reported service revenue growth of 29.9 billion lanes, up 13.1%. The reported growth was supported by current tailwinds, while normalized service revenue growth was 5%. The underlying performance was supported by strong growth in data and in VESA. From a market perspective, we would love a strong double-digit growth in Tanzania and the DRC. As the big performance is impacted by price transformation, our ever-recent regulatory reforms in the price board that went live in early May should meaningfully improve the market's prospects. Our customer base is 7.7% to 54.1 million, with net emissions of 3.9 billion customers, with a strong commercial traction across the portfolio. Data revenue increased 30.5%, supported by data traffic growth of 44%, and 14.4% smartphone user growth. Appraisal revenue was up 31.4% to $7.9 billion, contributing 26.5% of international service revenue growth. Appraisal growth was supported by a strong performance in the DRC, Institute, and Tanzania. Internationally, EBITDA grew 8.2% to 11 billion rand, and on a normalized basis, it was up 1.4%. As I said, EBITDA growth outpaced the other markets with growth of 19.7% in local currency. TRC's 11.2 US dollar growth was 6.9%, while Mozambique weighed on the same as the performance with EBITDA down 32% in local currency. Shifting then to Sephardicom from a numbers perspective, Safaricom delivered an excellent performance in Kenya and reported that Ethiopia delivered on important milestones in its first full year since launch. Service 7 increased 13.4% with Kenya delivering growth of 11.7% above its multi-year trend. Ibaka was up 16.8%, supported by Kenya, which reported a stellar growth of 16.6%. Kenyan EBITDA margins improved 2.8 percentage points to investing class 54.7%. Supported by strong EBITDA results, Safaricom delivered ahead of its EBIT guidance for Peru and Kenya. Kenyan EBIT was up 20.4%. Safaricom's net profit attributable to equity shareholders was up 1.2% in the year. This is a noteworthy result given that Ethiopia's email losses guided to a peak in the year. For the Kenyan business, a key driver of the result was inflation, but the revenue growth was an impressive 19.4% off a very large pace. I'm particularly excited about the launch of Mali during the year of first world product. Creating a savings culture to simple and rewarding world products will be a key enabler of growth for the continent. Indian mobile data revenue grew 18%, also accelerating from the prior years. Separately in Ethiopia, we reached 4.4 million customers with 2,800 site goals. Safaricom Ethiopia also launched M-PESA in August 2023. We see M-PESA accelerating our ambition to transform lives in the country, supported by the group's proven track record in financial services in Africa. Concluding my review with some numbers on our targets, the execution of our strategy and strong commercial momentum in FY25 supported an upgrade to our medium-term service revenue outlook. We now target growth of high single-digit from mid to high single-digit previously. Our growth given our growth and capital intensity prospects for the medium term remain unchanged. So outcomes here in balance for FY25 suggest another strong year for Kenya, while Ethiopia continues to scale up its operations. That concludes my review. Raisima and I are ready to answer any questions that you may have.

Thank you, Sal. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question today, please press star and then 1 on your touch-tone phone. If you decide to withdraw the question, please press star and then two to remove yourself from the list. Again, if you would like to ask a question, please press star and then one now. The first question we have comes from Maddy Singh of HSBC. Please go ahead.

Hi. Thanks a lot for taking my questions. Just two questions for my side. Firstly, on your HEPS performance, for the year, but also looking forward, I was just wondering, would you expect, would you say that HEPs basically has bottomed out and now going forward, we should start seeing positive momentum on that? Because I understand dividends are dependent on HEPs, so just trying to understand what's your thought on the momentum on that going forward. And then second question is, You know, I have in the morning presentation, I saw you mentioning price hikes quite a few times, actually. So not only for Africa, but also Egypt, also Mozambique. So just trying to understand your general views about pricing environment in your markets. Are you feeling, you know, more confident about, you know, the pricing power for DELCOs in general? And how do you see this evolving further over the next three years? Is that something which makes you, you know, more, let's say, positive about this going forward?

Thank you. Yeah, so I think maybe starting with the first one on apps, I think, so yes, we're more confident about apps going forward. Remember this, we took a number of ones of NOCs, right? So effectively a 2 billion NOC. uh that's just come from basically egypt in the devaluation that won't repeat going forward we've also had a 20 increase in our interest rates uh in this last uh period as well um and uh of course with interest rates expected to be your for for some recovery so i think from what's within our control we can definitely say that in looking at the four segments one feels a lot more confident Egypt exited at 40% with a stable currency. And so, you know, in terms of growth in the last quarter. So, you know, I think it's looking a lot more positive in that respect. I think Safaricom has had a standout year. And from the guidance you can see, we're planning another fantastic year. So I think that goes well. Then on IB, DRC has gone well. Tanzania continues to shoot the lights out because also there's the price flows, there's a dynamic. And wherever we've got price flows, I think you can be sure that the results will come. um and uh the next one of course is to plan for the drc but i think what's very encouraging is the price flows that went in in mozambique a week ago the trends are trending quite nicely and if we can get that exit back into double digit growth and that goes well for the international portfolio And then, of course, within there, the fintech part, all of that is growing quite nicely and is accelerating quite well, both in Egypt and in all the markets. And then finally, on South Africa, I think the price ups become very critical. And I think in the years, let me capture it this way so we can answer point two at the same time. So I think where we could, so what we've done historically is essentially try to bridge inflation through growth. So trying to grow voice and data predominantly to try and offset any inflationary pressures. I think what we see in mature markets now, like in Europe and the US and so on and so on, is that inflationary prices are becoming more prevalent. What we're doing is we're doing it slightly differently, which I think is quite smart, which is essentially what we call a more for more strategy. So what we're doing is putting the price up, but also giving the customer more value. So the effective rate actually is reducing to the customer. So the customer is getting better value. So it's a price transformation while getting, I very crudely put it as the price up, price down. So effectively what we're doing is gaining the price up from the customer, but the value, the effective price to the customer becomes less. So example would be if we took a gig, we're now giving the customer 1.2 gigs. for a 5%, 6% increase in terms of price ups. So, and then we're doing, we've now for the first time decided that we're now doing it in prepaid as well. So this year we're implementing it during April and May, price ups in prepaid. And I think you're starting to see the market doing similar kind of things. The postpaid ones, all the markets are the same. At prepaid, you're also starting to see, I think Telkom did one late last year, and I think the others are following similar kind of suits. So that's what we, but regardless of whether they do or don't, because we're giving more value, I think, you know, it stands us in good stead. So the way we see this price ups or price flows, be able to sustain and that's when we get to a part where where effectively you can't get to that growth on your standalone basis then you have to have these mechanisms uh in uh in place uh and so you know i think a very important dynamic of course in egypt we are still pushing for more price ups uh after embedding the one that we did in january but that one will carry through for the full year And we try to link it more to inflation going forward. But of course, it's a bigger conversation with government in that respect. But the price floors make sure that the revenue or the traffic goes fully into revenue. Ideally, you want price floors more than you want price ups. But of course, in some cases, you need both, like in Egypt, because of the devaluation. But price flows do give you the growth that you're looking for.

Would you ever expect a price flow or similar concept being introduced in South Africa?

Honestly, I think we should try. I think it will be more difficult in South Africa, but I think we should try. Because it could end up bringing the pricing down, but then You're bringing the pricing down for your monthly payers and so on, but you could end up with a, you know, 40, 50 grand a gig, but essentially, you know, getting a much higher yield for customers. What we've done in Mozambique is an example. We've agreed with government to put the prices up by more than 50%, but we've also taken the out-of-bundle rates and broke it down. So we've you know, part of the problem, but also created a proper solution of revenue flow. Thank you.

Thank you, Sal. The next question we have comes from Rohit Modi of Citi. Please go ahead.

Hi, thank you for the opportunity and congratulations on the 30th anniversary. Three from my side. Firstly, on the South Africa prepaid market, you mentioned that you haven't lost any market share. I can confirm, are you seeing more competition in the market given the muted performance this quarter, like it was flat? Is that the market which is kind of being flat or there's more competition in the market? Secondly, on the wholesale revenue decline, can you guide us how should we look at wholesale revenue in FI25. Is there a kind of 4-2 is the base now, that kind of decline that could see FI25 as well? Thirdly, in Egypt, the 900 million impact you had, like benefit you had on EBITDA, is this something that you will see in FI25 as well, or is this the one-off that you won't be seeing next year? Thank you.

Okay, so I still take the reclassification part. On the SA market share, I think we don't have the latest results out for this quarter. What we've seen up to December, of course, is that effectively, you know, we're holding to gaining share. uh and that the net losers have actually been more salsi actually during this period uh and then tn somewhat um i would say the way we captured i think from a trading perspective i think we've got a distinct we've we've done well both in prepaid and postpaid and so on against competition I think where MTN has a slight advantage on wholesale is because they've got the prepaid Celsius revenue. And with Celsius moving to a MVNO, they basically have that revenue coming in. On the positive side, of course, that Celsius is not a network operator anymore. It's the MVNO. On the, so that's the one part, but I think where we have a strategic advantage is our beyond mobile services, fixed IoT, financial services, digital services. So I think we are facing them there by a long shot. So I think that generally is proving and then we pay close bid, I think we're doing better. So that's the way I would capture it. In terms of that, in terms of the wholesale revenue decline, it's not all yet in the base. So I think it will probably be in the base in the first quarter, correct?

Yeah. So I think the 4Q trend is there or thereabouts. And then it will certainly have pressure in the first half of the year. Yeah.

And then in terms of the reclassification, so this is not a once-off. So this is relating to the share of the interest on the e-wallet funds that are in Volacash. And we expect this to obviously continue going forward. So now that it's in the base, expect it to still come through. So, yeah, that will continue into the future.

Thank you so much.

Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question today, please press star and then one now. The next question we have comes from Jonathan Kennedy of Pressing Securities. Please go ahead.

Good afternoon. Just a couple for me on South Africa. I know you've spoken about the price increases on first aid and PPE. Could you give us a sense of where the blended price increases are likely to land in SA? And then secondly, obviously there's been quite a bit of cost inflation around network resilience and staff costs. Can you give us a sense of how those are progressing And will we likely to see slowing in those cost lines? And then finally, Egypt and local currency, the FX movement, I think even though margins were quite a bit higher than guided, do you think that about 45%, I think, will that be sustainable? Or do you think that we're still going to see inflation accelerating that market post the currency deval. There's some sense on EBITDA margins there. Thank you.

Yeah, so let me start with the price ups. So effectively, the price up from 1st of April is in on contract. It's a 7% price up on contract with a requisite uh quality 14 15 increase in terms of value that's been given to the customer so that's already gone in from first of april uh and uh then on on prepaid um it's still early days to be honest but um the idea is to carve out a better uh performance in in terms of uh prepaid so i would say probably circa 3% to 4% growth to ensure that we get the result. We'll have to see how it is, but essentially putting up the prices by 4% or 5% and getting 8% to 10% more value. In terms of eDip, I think the business has shown It's got a resiliency. I mean, it's been achieving margins in the 40s for a while now. And so the resiliency is there. I mean, it's just been impacted by the valuation. I think also just remember that in Egypt, you've got the price floor, you've got the fintech piece, which is growing. And of course, now moving the interest up uh uh or to the top will also positively impact uh even our margins going forward uh so to do that goes the interest revenue on a lot of cash uh and then of course you you've got the the the volume growth uh and so on and well managed costs so that this business will continue to be a 44 45 percent uh you know uh uh business uh going forward

So in terms of the staff costs and the network resilience, so staff costs slightly elevated both this time around, and that is in part as we reclassified some of the capitalized costs to opex so this is a way obviously we constantly kind of just fine-tune our models and so on and we identified that the some of the costs that we capitalized, we wanted to reduce the rate at which we capitalized so that increased OPEX. The benefit was from a CapEx perspective was from a cash flow sense. There was no change. So that is also the base and going forward that should normalize back to staff costs growing at more or less inflation levels and with the a number of initiatives to optimize in headcount. We're not increasing headcount with the mature businesses, kind of stay stable, and also just making sure that the growth is restricted to newer businesses that we need to support. But overall, we expect that the growth will be normalized at 5% to 6% kind of invasion levels. and noting obviously the inflation levels are different for different countries, but they're more blended in that kind of direction. Network resilience, we do note uh the tech opex uh is a um growing higher than the rate of growth in the other uh costs and that is as a result of energy costs that um have shown a big increase across all the different markets and energy here in the basket of electricity as well as a diesel um so and we are looking to set some of these costs with improved efficiencies in terms of how we manage our network and as well as cost savings programs that are continuing across different areas of business. We delivered on the cost efficiency program that we had identified for 2024 under Fit for Growth and we'll continue with it. So being it discussing some of the contracts with the suppliers, lots of RFPs, you know, the commission structures, digitalization of different business processes, and increased sharing. So that's how we are looking at still supporting a growth that will give us a positive dose, i.e., you know, when you compare with the revenue growth.

Thank you. Ladies and gentlemen, again, if you would like to ask a question, please press star and then one now. The next question we have comes from Mayurin Rajaratnam of MIPFA. Please go ahead.

Good afternoon and thanks for the opportunity. I can just reiterate firstly a comment by Maddy that, you know, since you guys link, you know, at shareholders what we want to see is big dividends and dividends growing in leaps and bounds, right? The fact that you link it to a HEPS means you want the HEPS to be growing in leaps and bounds. So I have a question on South Africa related to how fast you can grow or how well you can grow. I mean, if you look at slide 11, you know, you've provided a group EBIT breakdown, operating profit breakdown, but, you know, that's not completely representative because that's at the consolidated level. You actually, you know, if you look at the proportionate level, you only own but less than 35% or so of Safaricom, 55% of Egypt, and blended base, give or take 70% of international. And then if you devalue the Egyptian pound to what it is now and look at what your proportional EBIT looks like, 70% Shamil still comes from South Africa, right? So South Africa is such a big part of your life. And I like to understand why it's struggling to grow. I mean, your EBIT went down 4%. Operating profit was down 4%. Now 70% times 4 is already a negative 2.8% before you say hello to all your wonderfully growing businesses in Egypt and so on. So on a proportionate basis, it's quite difficult if you don't grow South Africa. In South Africa, you guys don't have any M-Pesa. and your prepaid revenue is growing at, what, 6% in the last quarter. And these are the growth drivers, M-Pesa and prepaid revenue, data, prepaid data, sorry. That's what other prepaid data is growing at 6%, right, in the last quarter. So those are the growth drivers elsewhere, but it's not growing in South Africa because you don't have M-Pesa and data is not growing at the moment, it looks like. And it looks like in the coming year, there's more headwinds in wholesale, you know, from what I'm hearing, the telecom contracts are being renewed and so on. So strategically, how do we actually fix this so that South Africa, which is about 70% of my loose proportionate currency devalued EBIT looks like, and then that will allow your hedge to grow and therefore dividend to grow. That's my first question. I have a follow-up if I can.

Thanks. Yeah, so the way I think we need to think about it is that I think You're right in saying that previously we tried to grow South Africa by just volume growth and so on. And I think what we're having to do now is to make sure that we are enforcing it through price ups, so that we can ensure the revenue growth. So that's the first part. So I think that's a change from where we were previously. That's on the contract side, but also on prepaid going forward. Scouting on the prepaid growth that we're talking about. I think where the pressure has come is the data traffic generally. And don't get caught up about the trend in the last quarter because there was a strong competitive in the previous quarter. Rather look at prepaid data revenue growth over the year. And I think there's a prepaid data growth and the mechanisms around that, I think, are still strong. So, I mean, 13, 14% growth in terms of prepaid revenue growth. The issue is voice. And I think they started to see the voice designs coming down and then starting to improve on voice designs. And that's because of moves to OTP, all of those type of things. So we have to go prepaid. data revenue even stronger to offset that. So I think that's the first part. And I think through the price ups in prepaid, you're almost crafting out that result, which we didn't do last year, to be honest. We did it on contract, but we didn't do it on prepaid. The price ups have also been at such a level to try and offset some of the pressures in wholesale. We've gone for a higher increase of 7% to try and offset that. So that's That's the kind of thinking there on wanting to take away some roles and pressures and to craft up the result. The second part, I think, is the new services are growing and you'll see the new services grew 13%. I don't agree with you in terms of that. I agree with you that it's not as big as M-Pesa, but I think 13.2%, 13.2% growth and 11.8 billion on new services, despite financial services, IoT and digital has been quite good. Where we are seeing growth is the financial digital service category, which I mean, that business is $4.8 billion from nothing a couple of years ago, with a margin of 45%. So that's been really good for us. And so, you know, I think we've got a couple of brokers in the fire. The fiber side is growing nicely as well, so we saw a strong growth. IT was impacted. We should have gone faster, but it was impacted by this IP15.

There will be an opportunity for questions after the presentation. Should we should ask a question, please press start in one. Should we should withdraw your question, please press start in two.

It's definitely growing and the members offer a much larger base. And then I think the cost focus in South Africa, we have to change some of the models which we're now doing. So we've basically reduced margins in the distribution channel as the conflicts have come up. we're taking a much more, we're doing the procurement and aggressive approach on that, but we also have targeted such vendors to bring their costs down and executing on that. So we put into one bucket, one is a forced decline in terms of, look, this is it, this is the rate we need. If you're in contract, the second bucket is really looking at all the costs of the the entire value chain and then reducing that, including people, including everything. So we are also driving that. And I mean, ideally, we want South Africa to grow for 5% a year. So that's the intention there, trying to keep pace with inflation. And then on the bottom line, of course, remember on EBIT and all of that, one of the, and some of the things that have been affecting us is load shedding has had a big impact on the, so you've had increased depreciation. Because of that, you've also got the spectrum, which on the one side solves your problem. On the other side, you've got the amortization on the spectrum that's come through. And then, of course, remember, all the interest costs are sitting in South Africa because of the debt sitting in South Africa. That's split between group and SA, but a lot of our debt actually sitting in SA. so you need to also see it as the hub where everything goes through but i think um in the end it's about delivering earnings growth and i think the mix of the countries plus uh plus the different parts uh i think it really puts us into a context of where uh you know we will get and remember just to be clear safari com is not consolidated today so it's not in the numbers

uh the the the money and the revenues and all of that is excluded just comes to in the associated line egypt is not salinated sure sure um yeah it comes at the ebit line so it's there you know that's why i was talking about ebit on slide 11. um this the point this the second follow-up i suppose is actually you know if shareholders all you can eat is dividends and growing dividends which is linked to growing hips is there not an argument that we must move away from your consolidated revenue and EBITDA guidance, so it's a question of your guidance, to actually a proportionate EBITDA guidance? If you think about it, because of less of Egypt and less of international, your proportionate EBITDA guidance might be high single digit on a consolidated level, but actually on a proportionate level, it might be mid-single digit, right? But that's what shareholders can eat, really, and so... If the focus is to look after shareholders, shouldn't the guidance be more on a proportionate basis?

Just to put it in perspective, we own 55% of Asia, we own 85% of Mozambique, we own 75% of Africa. of Tanzania. We own 51% of the DRC, but we're busy with a recap and discussions around that and so on. So, and we own 80% of Lesotho. Yeah. And then, of course, from a, you know, from a Safaricom perspective, there's a 35. I mean, we're happy to give uh you know from a transparency we're happy to always get better on this so if that's what we're helpful of course we'll we'll we're not change guidance but we're always happy to provide additional color

Yeah, and one small build from my side is Safaricom does provide its own guidance. So you have our consolidated businesses, which we provide, and then them as a separately listed company provide guidance, which obviously will translate ultimately into our associate line. So you should have all the pieces to the puzzle. But that's not to take away from your overall point, which is you want to eat dividends.

Sure, and as sellers, we can only eat the proportionate growth. Thank you.

Thank you, Sal. The next question we have comes from Prashantan Odayo from the Bank CIV. Please go ahead.

Thanks, and congratulations on the results. Just three quick ones from me. I just want to note that I was looking at the cash flow statement. I noticed that the debt number, or you repay some debt of around $10 billion more than last year. I don't really see that in the balance sheet in terms of any reduction in any material liability balances. I just wanted to see, you know, get some color on what was that for. And then, you know, back onto your voice, uh question i know a lot of people have been asking about this one on essay uh i remember earlier in the call you said that your prepaid voice decline was six percent uh in the last quarter Are you able to share what the total was? I mean, is postpaid also declining at a similar level? If so, then, you know, your voice is actually not doing too bad, to be honest. It's kind of like bottoming out in terms of the decline. And then linked to that, can you tell us, like, what percentage of Egypt service revenue is from voice? I remember a while ago you told us it was mid-teens, those at interim. uh is that growing in line with the price ups or you know is it declining in favor of a move to data voice options uh i can't remember if you're allowed to make what that was in egypt or not i mean you guys can clarify that for me um and then yeah if you can tell us also if possible you know a rough percentage of how much of your of your revenue needs to become some data thanks

So with the debt that you're referring to, to pay for the transaction in Egypt, so you need to take into account that plus the cash. that would also come with the business that you're acquiring. So, hence, you know, maybe not seeing the net increase of 10 billion, but also noting that as our different debt packages mature, we have done a number of refinances. So, but that 10 billion is actually 11 billion is pretty much in the base.

Okay, then just moving on to the group picture. um for sorry the the voice the voice discussion and then some of the other metrics across the region in the voice so uh in in south africa you correct we we call that down six and the quarter or um prepaid in south africa and that was a better quarter than we we've had through the course of the year uh to shamil's point he made earlier we've obviously put through a few initiatives there to to try out a bit more value and and and try uh address the the rate of that decline At an overall group level, we disclosed in today's presentation, we have around just a little bit less than 20% of the total contribution of the group from prepaid voice. In terms of South Africa contract voice, I actually don't know that number. It would require sort of breaking up the ARPU of our contract customers sort of on quite an arbitrary basis. And so we don't track that. We do track, obviously, the overall ARPU spend in our contract segment, but not the voice data split. And then when it comes to Egypt, yes, you're 100% right. The Egyptian business has a slightly different voice dynamic to the rest of the group in that you can't do WhatsApp calling. uh and your um your yardstick of of uh sort of teens odd type of contribution is is again there or thereabouts when it comes to to the the share of voice in in egypt and it is one of the the only markets we have with a few markets we have that is actually growing its its voice revenues at the moment and that was supported by the process in that market in in december so hopefully cover all of the bases there

Yeah, that was good. Thanks, JP, and thanks, Rasheeda, as well.

Thank you. The next question we have comes from Nadeem Mohammed of SBG Securities. Please go ahead.

Good afternoon. Just a quick one from me on your merchant strategy and M-PayZine International. I see you've doubled your number of merchants. I'd just like to get a sense of the opportunity you're seeing there. And then, secondly, I see that... and pays us about 26 or 27% of service revenue in the international. Are you seeing the margin efficient come through at the net profit line as well? Is it a much bigger contribution at the net profit line than the other services? Thank you.

I think on the merchant side, I mean, there's a couple of opportunities. The first one, of course, is payments. So it's just, you know, like we would do point of sale payments, what we do is what we call a pay set toll. So you effectively pay, put in the merchant number and pay. So one, you can scan a QR code. Two is you basically, you can get debt to pay. The third part of the revenue stream then comes in, in terms of merchant lending. So you can then make, so one is processing of payments. And so we make fees on that. The second one is essentially then opening up the ecosystem of services to the merchant. And that would start with merchant lending. But then also, you can then expand that into merchant ordering like we do in South Africa. And so on. And then in Africa, we also do invoice financing. So there's a whole ecosystem of services that you want to build out into the merchants and be able to provide those services to them.

And then just the bottom line impact, I guess.

So the M-Pesa model is based on a number of intermediaries and obviously the commission structure. So whilst it is a strong contributor in terms of growth, We don't expect the margin expansion to be that huge, but it does nevertheless continue to contribute. The magic is really as we continue to evolve the M-Pesa model and changing the type of products. Whereas the base product is a P2P and then cash in and cash out. And now we are seeing additional products that come in and obviously that will have to continue to sustain and improve the margins going forward.

Yeah. Thank you very much. The number we disclosed there is that financial services now makes up 20% of our PBT. So it's become a meaningful number to the bottom line. Wonderful. Thank you so much.

Thank you, Sal. Ladies and gentlemen, at this stage, we have reached the end of our question and answer session. I will now hand back over to Shamil for closing remarks. Please go ahead, Sal.

Thank you, and thank you for joining us on today's call. If there's any questions that you may have, please reach out to our investor relations team. Thank you, and enjoy the rest of your day.

Thank you. Ladies and gentlemen, you may now disconnect your lines. Thank you for joining us.