As at: 14 September 2026

Executive Summary

Key highlights

In this report, we review Vodacom’s latest trading update for the quarter ended 30 June 2026, released in July 2026:

Financial results at a glance:

• Revenue: Group revenue grew by 5.9% (11.4% on a normalised basis) from the corresponding period to R42.4 billion, supported by 17.8% growth in financial services revenue, but was impacted by translation effects from a stronger ZAR. Normalised group services revenue grew 12.6%, supported by strong performance in Egypt, which achieved service revenue growth of 32.8% in local currency, reflecting continued investment in spectrum and network capacity.

• Vodacom’s ‘beyond mobile’ services rose from 21.4% to 22.8% of group service revenue year-on-year, generating R7.8 billion in the quarter. Financial services remain the largest component of ‘beyond mobile’, including Safaricom. Mobile wallet transaction value expanded 19.1% year-on-year to $547.9 billion.

• Group financial services revenue grew by 17.8% to R4.5 billion on a reported basis and 27% on a normalised basis.

• Group capital expenditure (capex) was R4.9 billion, representing 11.5% of group revenue reinvested in capex during the quarter. Management continues to guide capex to 13.5%-14.5% over the medium term.

• FY26 free cash flow (FCF) rose 20.1% to R21.8 billion, headline earnings per share (EPS) moved 22.9% higher to 1 053 cents, and return on capital employed improved to 27.5% from 23.5%.

• FY26 dividend advanced by 18.5% to 735 cents per share. However, the R35 billion debt-funded Safaricom acquisition increases leverage and has prompted a revision in the dividend policy to a payout of at least 65% of headline earnings, from at least 75%.

Analyst thesis

Our recommendation is based on:

• Safaricom consolidation as a structural catalyst: Vodacom completed the acquisition of an additional effective 20% stake in Safaricom on 30 June 2026, increasing its holding from approximately 35% to a controlling share of 55%. The R35 billion transaction comprised of a 15% stake acquired from the Government of Kenya and an effective further 5% acquired from Vodafone Group. On a full-year consolidated basis, Safaricom is expected to make a significant contribution to reported group results, with group EBITDA projected to increase by 47%.

• Fintech becoming a key growth engine: Vodacom is leveraging its large mobile customer base and trusted M-Pesa, Vodafone Cash and VodaPay platforms to deepen its role in everyday financial services across Africa. Strong financial-services growth in Egypt and the International M-Pesa markets, combined with the consolidation of Safaricom, expands Vodacom’s fintech scale and strengthens the group’s position in Africa’s mobile financial-services market.

• Egypt and the International portfolio: These businesses provide attractive growth opportunities outside the mature South African market, with revenue growth translating into operating leverage and supporting group earnings diversification. They benefit from rising smartphone penetration, strong data consumption, underpenetrated digital financial services, and expanding merchant ecosystems.

• Key risks: Key risks include the negative impact of translating local currency earnings into earnings reported in ZAR, currency depreciation, inflation, stricter regulation, spectrum costs, and political or economic disruption. There is also integration risk associated with incorporating Safaricom into broader group operations and managing its position as a strategic public asset.