Vodacom Falls After Cutting Dividend Amid Economic Weakness

(Bloomberg) -- Vodacom Group Ltd. shares fell the most in more than a month after Africa’s biggest wireless operator by market value reduced its first-half dividend amid weaker economic conditions in some of its key markets.

The stock slumped as much as 4.6 percent, the most since Oct. 4, and traded 3.2 percent lower at 147.50 rand as of 10:29 a.m. in Johannesburg. That compared with a 0.6 percent gain on the FTSE/JSE Africa Top40 Index.

Shareholders will receive an interim dividend of 3.90 rand a share, compared with 3.95 rand a share a year ago, the Johannesburg-based company said in a statement on Monday. Earnings per share excluding one-time items rose 1.1 percent to 4.45 rand. The dividend reduction was partly due to the impact of issuing shares for the purchase of a 35 percent stake in Safaricom Ltd., Kenya’s biggest company.

“The operational performance was weaker than expected and that impacted the dividend,” Peter Takaendesa, an analyst at Mergence Investment managers in Cape Town. He was looking for earnings to rise 6 percent to 7 percent in the first half.

Vodacom, which is 65 percent owned by Newbury, England-based Vodafone Group Plc, is investing in data services in South Africa and international operations as more customers start using internet and smartphones while voice usage declines. The company is the market leader in its home market, ahead of MTN Group Ltd., and now has 40 million customers in a country with population of about 56 million.

Revenue from data services surpassed voice for the first time in South Africa, Vodacom’s biggest market, as more customers switched to internet-enabled phones. Helped by promotions, the wireless operator added more customers at home and in markets such as Tanzania, it said.

“We expect that data contribution in our international markets could surpass that of voice in the next five years or so,” Chief Executive Officer Shameel Joosub said on a call with reporters.

Vodacom reiterated growth targets for the next three years. Service-revenue growth is expected to be in the mid single-digit percentage, while earnings before interest and taxes will probably rise in the mid-to-high single-digit percentage.

The company’s shares plunged on Oct. 5 after South Africa’s antitrust regulator started a probe into a contract with the National Treasury. “We are fully cooperating,” Joosub said. “We believe that the awarding was a well-governed process.”

To contact the reporters on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net, Loni Prinsloo in Johannesburg at lprinsloo3@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, John Bowker, Ville Heiskanen

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