Vodacom records Sh103 billion loss in revenue due to levies

Summary

  • Vodacom Tanzania’s total revenues of Sh956.515 billion were almost one percent lower than what the company collected from its various services during the preceding year, it’s latest annual report shows

Dar es Salaam. Vodacom Tanzania’s revenues were short of target by Sh103.8 billion during the year ending March 2022 due to the impact of mobile money transaction levies, the company has revealed.

Vodacom Tanzania says in its latest annual report that it garnered a total of Sh956.515 billion during the period.

This was almost one percent lower than what the company collected from its various services during the preceding year.

The amount was also about 9.8 percent adrift of what the Sh1.06 trillion that the company had projected to collect during the period.

“The introduction of mobile money levies in the year was an unfortunate development for financial inclusion in Tanzania,” says the company’s board chairman, Judge (rtd) Thomas Mihayo, in the annual report which is also deposited with the Dar es Salaam Stock Exchange (DSE).

The company registered a drop in revenues across four of its six revenue streams.

The government introduced mobile money levy in June last year (2021) in an effort to raise more funds to construct roads and water projects in rural areas.

However, its implementation was roundly criticised, resulting into a drop in mobile money transactions as people resorted to other alternative means of sending and receiving money.

As a result, Vodacom’s Mobile Money (M-Pesa) – which has grown to become the number one revenue earner for Vodacom Tanzania – registered a 7.6 percent drop in the amount that it brought to the company’s basket.

Vodacom, which remains the only publicly-listed telecommunication firm in Tanzania, registered Sh329.557 billion in M-Pesa revenue during the year ending March 2022, down from Sh356.801 billion that was garnered from the platform during the preceding year.

“This reflects the impact of the levies that saw M-Pesa users fell to 6.5 million by the end of the second quarter compared to the first quarter’s 7.8 million,” Vodacom Tanzania acting managing director Hilda Bujiku says in the report.

And, according to Judge Mihayo, the levies significantly increased the costs for customers to transact with mobile money, resulting in over 1.3 million customers immediately relinquishing our M-Pesa services.

The other revenue streams that registered a fall in revenues include Mobile Voice, Mobile Incoming and Messaging.

Mobile Voice, which is the second major source of revenue for the DSE-listed telecommunication firm, fell from Sh302.037 billion during the year ending March 2021 to Sh286.985 billion during the year ending March 2022.

On the other hand, revenue from Mobile Incoming and Messaging streams fell by 17.3 and 9.5 percent respectively.

The fall in the four streams depleted the impact of an 18.9 percent and a 46.6 percent rise in the company’s overall financial performance.

The company processed more than Sh60 trillion worth of transaction value through M-Pesa platform during the year ending March 2022, highlighting the important role it plays in the country’s financial ecosystem.

“Our strong commercial execution coupled with the government’s intervention through a 30 percent levy reduction in September 2021, supported a partial recovery of the customer base to 6.8 million customers as at financial year end,” said Ms Bujiku.

However, Ms Bujiku says the company processed more than Sh60 trillion worth of transaction value through M-Pesa platform during the year ending March 2022, highlighting the important role it plays in the country’s financial ecosystem.

“Our strong commercial execution coupled with the government’s intervention through a 30 percent levy reduction in September 2021, supported a partial recovery of the customer base to 6.8 million customers as at financial year end,” said Ms Bujiku.

Despite the pressure on reported service revenue, Ms Bujiku says, the company reported operating profit of Sh64.4 billion, courtesy of cost containment measures.

“Vodacom Tanzania delivered another year of strong execution. We made good inroads across our key strategic focus areas, while also managing new headwinds such as levy on mobile money transfers and withdrawal transactions.”

The company however sees light at the end of the tunnel, thanks to a 30 percent reduction in mobile money levies announced in September 2021 and a further 43 percent reduction passed by the parliament in June 2022.

“The decision will reduce the end-user charges. We believe by unlocking the growth potential in M-Pesa we can meaningfully address financial inclusion,” she expounded.

Vodacom Tanzania board chairman, Retired Judge Thomas Mihayo said: “Whilst the impact of the levies is difficult to dismiss, we are encouraged with an increasingly open-door attitude from the government, with respect to this matter.”

He exuded Vodacom’s optimism that together with the government, they could find solutions that will progress further realisation of benefits that technology could deliver to the country and financial inclusion.

“In a particularly competitive market environment, the company’s ability to maintain its leading position both in terms of market share and customer net promoter score, is testament to the strength of its execution and strategy,” he said.