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Vodafone CEO teases M-Pesa IPO

Vodafone CEO Nick Read called out the stellar performance of M-Pesa, the Group's money transfer platform in Africa, on the Q&A session following presentation of Q1 financials for FY22 (ended March 31).

The platform processed almost 4.5 billion transactions, an increase of 45% year-on-year, while revenue from Vodacom's financial services grew by 34% over the same period. "These are staggering numbers for a platform that's number one in every market we're in," claimed Read. He then revealed that discussions have been ongoing for nine months, involving Vodacom CEO Shameel Joosub, about how best to "drive shareholder value" from this (somewhat hidden) Group gem. One analyst estimated M-Pesa was worth 10 pence per Vodafone share.

"We really need to start separating this business into a legal entity and have complete transparency," said Read. "This will allow us other [inorganic] opportunities going forward."

Vodafone's CEO didn't explicitly reference the possibility of an IPO, but he did speak in glowing terms about what he viewed as a successful listing of Vantage Towers, the Group's European towerco spinout. In the near term, Read is keen to expand M-Pesa both geographically and in terms of product set.

"There is an opportunity to take M-Pesa out of our footprint in Africa, while we're also looking at the journey from feature phones to smartphones and [the introduction of] mini-apps for things like savings, micro loans and insurance," he said. More commercial partnerships are also being explored, building on an earlier tie-up with Alipay.

Read pointedly noted that M-Pesa had already branched out from peer-to-peer transactions into the likes of company payroll systems and utility payments. The VodaPay "super-app" will be launched in South Africa in the "coming months," said Read. Over 70 merchants have apparently already joined the ecosystem.

Can't wait for back to school

"We're back to service revenue growth in Europe and Africa, growing in both consumer and business," said Read, before adding that "we're clearly not back to normal." Most of the headwinds, he maintained, were down to exceptional declines in retail customer footfall caused by the pandemic.

Footfall tanked by as much as 70% in Germany compared with pre-COVID levels, although the average dip was 40% across Vodafone markets. Read looked forward to the "back‑to‑school" season, starting in September, following an anticipated suppression in commercial activity during the current quarter.

"We'll then focus on propositions, promotions and above the line marketing, which we think will reignite our commercial momentum," he said. "We're firmly on track for our guidance."

And the actual numbers?

Vodafone posted organic year-on-year service revenue growth of 3.3%, to €9.39 billion ($11 billion). One percent of this was due to the "pandemic shock" in Q1 2020-21, which lowered comparable figures. "Even excluding that, I would say this is a healthy growth," asserted Read.

One blot on the Q1 copybook was Italy, which saw service revenue decline 3.6%, year-on-year, to a shade over €1 billion ($1.12 billion). Vodafone pinned some of the blame on continued price competition.


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Germany, Vodafone's largest market by service revenue, saw 1.4% growth, to €2.9 billion ($3.4 billion) over the same period. Roaming and visitor revenue increased in Q1 "having been materially impacted by lower international travel over the last 12 months."

FY22 guidance with adjusted EBITDAaL is expected to be between €15 billion ($17.6 billion) and €15.4 billion ($18.1 billion), while projected adjusted free cash flow is at least €5.2 billion ($5.9 billion).

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— Ken Wieland, contributing editor, special to Light Reading

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