Lesley Stones
10 November 2009
Johannesburg — CELLULAR operator Vodacom has taken a huge hit from an overpriced acquisition last year, with its net profit tumbling 98% for its latest interim period.
The 700m acquisition of voice and data carrier Gateway has been revalued to about half its original worth, incurring an impairment charge of R3,2bn.
Yet Vodacom implemented strong damage control when it reported its results yesterday by declaring its first interim dividend of 110c a share. That helped keep its shares buoyant at R52,02, down 36c for the day.
SA's largest cellular operator now needed to become leaner and more efficient to respond with more agility as the world and the industry around it changed, said CEO Pieter Uys. One immediate change is to slash capital spending. Plans to invest R3bn in the rest of Africa were cut to R2bn for the year. Uys had warned its networks in the Democratic Republic of Congo and Tanzania would not be expanded in coming months.
He reiterated that Vodacom would pull out of the Congo completely if conditions did not pick up in the coming quarter. The Congo cost it heavily in the past six months with reversal of a deferred tax asset wiping out R551m.
Vodacom will not cut back its R5bn capex in SA, yet it has suffered a slowdown in subscriber growth as a new law forces users to show identity documents when they join a network.
Overall, Vodacom saw a 10% rise in revenue to R28,6bn for the six months to September and a net profit of just R59m, down from an interim R3,7bn a year ago.
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