Vodacom is ending its long-standing reputation as one of South Africa’s most generous dividend-paying companies, choosing instead to retain more cash to fund an ambitious expansion strategy anchored on its majority acquisition of Kenya’s Safaricom and a push to become one of Africa’s biggest digital financial services providers.
The Johannesburg-listed telecoms group said it has lowered the minimum dividend payout under its policy to 65 percent of headline earnings from at least 75 percent previously, marking a major shift for a stock widely held by South African pension and retirement funds seeking reliable income.
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The move comes only months after Vodacom reaffirmed the 75 percent payout policy when it reported its full-year 2026 results in May, highlighting how quickly the company’s priorities have changed following the completion of its long-awaited acquisition of a controlling stake in Safaricom.
“The board has reviewed the group’s capital allocation framework to balance investment in network infrastructure, scaling digital and financial services, progressive deleveraging and shareholder returns,” Vodacom said.
The lower payout ratio signals that Africa’s telecom industry is entering a new phase where operators are preserving cash to finance expensive investments in fibre infrastructure, fintech platforms, cloud services and artificial intelligence.
Shameel Joosub, the company’s group chief executive officer sought to reassure shareholders that despite the policy change, dividends would continue to grow.
“At this revised payout level, we expect to grow the dividend per share for FY2027, based on our current growth trajectory and the prevailing economic conditions,” Joosub said.
The strategic reset coincides with Vodacom increasing its stake in Safaricom from 35 percent to 55 percent, effective June 30, giving the South African operator control of East Africa’s largest telecom company and one of the continent’s most successful mobile money businesses.
The acquisition significantly reshapes Vodacom’s earnings profile and geographical footprint, strengthening its exposure to faster-growing East African markets while accelerating its transformation from a traditional mobile network operator into a broader digital services company.
Following the transaction, Vodacom raised its Vision 2030 revenue ambition to more than R300 billion from over R200 billion previously. It also upgraded its medium-term Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) growth target and operating free cash flow outlook from double-digit growth to growth in the early teens.
Financial services are expected to account for more than 22 percent of group service revenue following the Safaricom consolidation, up from about 13 percent previously, reflecting the increasing importance of fintech to the group’s future earnings.
“We are now entering a new phase of growth, supported by a more balanced portfolio, broader earnings drivers and increased exposure to some of Africa’s most attractive opportunities,” Joosub said.
Vodacom’s latest quarterly results showed the strategy is already paying off outside its home market.
Group revenue rose 5.9 percent to R42.4 billion in the quarter ended June 30, while service revenue increased 6.3 percent to R34.3 billion. Excluding foreign exchange movements, service revenue grew by a stronger 12.6 percent.
South Africa, however, continued to lag the rest of the group. Service revenue in the domestic market increased only 2 percent, below inflation and slower than the 2.8 percent growth recorded in the previous quarter. The company said prepaid services returned to growth after simplifying customer offers and improving value propositions, but overall market conditions remained challenging.
Growth was instead driven by Egypt, where service revenue surged 32.8 percent in local currency, supported by a 73 percent jump in financial services revenue. Vodacom’s international operations also delivered strong underlying performance, with Tanzania, the Democratic Republic of Congo and Lesotho contributing to normalized service revenue growth of 14 percent.
The group’s financial services business continued to expand rapidly, with revenue climbing 17.8 percent to R4.5 billion during the quarter. Including Safaricom, Vodacom processed mobile money transactions worth $547.9 billion over the past 12 months, representing a 19.1 percent increase from the previous year and underscoring the growing importance of digital financial services across Africa.
Beyond traditional mobile connectivity, businesses including financial services, fixed broadband, digital platforms and Internet of Things solutions generated R7.8 billion during the quarter, accounting for nearly 23 percent of total service revenue and moving the company closer to its Vision 2030 target of almost 30 percent.
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Vodacom also strengthened its commitment to South Africa’s fibre infrastructure market by investing an additional R800 million in fibre operator Maziv during the quarter to support the completion of Maziv’s acquisition of Herotel.
Joosub said the investment would help accelerate fibre deployment, improve broadband access and contribute to narrowing South Africa’s digital divide.
The decision to retain more earnings while expanding investments suggests Vodacom is prioritising long-term growth over immediate shareholder returns. With mobile markets maturing across much of Africa, operators are increasingly betting that future value will come from fintech, fibre infrastructure, enterprise services and digital platforms.
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