One of the more mispriced compounders on the continent: a business whose commercial engine and reported earnings have temporarily diverged, creating an entry window we believe is closing.
Vodacom Tanzania is the only listed mobile network operator in Tanzania and the custodian of M-Pesa, the country’s dominant financial-services rail. Beneath a deliberately depressed FY2026 headline profit lies an operation growing service revenue above 20%, expanding margins, and generating accelerating cash. The distortion is mechanical, not structural: a two-year, US$100m modernisation programme front-loads depreciation (TZS 60.6bn in H1 FY2026 alone), compressing reported profit while leaving the operating business untouched. Half-year reported profit of TZS 41.7bn sat against underlying profit of TZS 99.6bn.
At ~TZS 780 the market capitalises the equity at ~TZS 1,747bn — roughly 3.2× forward EV/EBITDA, a 30–45% discount to comparable EM mobile-plus-fintech operators. Our DCF returns a base value of TZS 1,099/share; the blended range of TZS 980–1,160 implies 26–49% upside before a sustained, rising dividend.
Four pillars, each independently defensible and collectively compounding.
The modernisation programme front-loads depreciation; it does not impair cash. As it rolls off through FY2027, reported profit steps up sharply — FY2026 reported EPS ~TZS 47.9 against underlying ~92–100. A defined two-year half-life, not a re-imagining of the business.
M-Pesa generated TZS 590.0bn in FY2025 (+29.3%), now 38.9% of service revenue; adjacent lending, insurance, savings and merchant payments grew ~50%. A higher-return, lower-capital profile that justifies a multiple premium to a plain telco, not a discount.
Mobile-payment value rose 28.3% to TZS 255.1tn in 2025; active mobile-money subs 75.8m; agents up 34% to 1.98m. Smartphone penetration only ~42%. The runway is measured in years.
0.9× net-debt/EBITDA, Vodafone parentage, market leadership, 50% payout — yet ~3.2× forward EV/EBITDA owing to thin DSE liquidity and headline optics. We are paid to be patient.
A ~68m-person economy compounding real GDP at ~6% with inflation near 3.3% — the substrate for a multi-year digital-payments super-cycle.
| Indicator | 2024 | 2025 | Growth |
|---|---|---|---|
| Mobile payment value (TZS tn) | 198.9 | 255.1 | +28.3% |
| Mobile payment volume (m) | 6,414 | 7,959 | +24.1% |
| Active mobile-money subs (m) | 63.2 | 75.8 | +24.7% |
| Agent network (m) | 1.48 | 1.98 | +34.4% |
| Registered merchants (m) | 1.33 | 2.79 | +110.1% |
| Digital credit value (TZS tn) | 4.22 | 5.58 | +32.3% |
| Digital savings value (TZS tn) | 1.21 | 3.18 | +163.1% |
| P2P transfer value (TZS tn) | 15.7 | 20.2 | +28.6% |
Source: Bank of Tanzania, National Payment Systems Annual Report 2025.
Three vectors accrue disproportionately to Vodacom: interoperability (TIPS + TANQR convert cash to electronic flows, won by the deepest agent/merchant network), the savings-and-credit overlay (the highest-margin layers, growing fastest), and smartphone-led data (every point of adoption pulls a data-ARPU uplift through the network being modernised today).
The country’s leading MNO and only listed operator — 75% owned by Vodacom Group (South Africa), itself controlled by Vodafone Group (UK), with a 25% public free float.
| Corporate snapshot | |
|---|---|
| Listing | DSE: VODA (since 2017) |
| Shares in issue | 2,240,000,300 |
| Parent (75%) | Vodacom Group Ltd |
| Ultimate parent | Vodafone Group Plc |
| Free float | 25% (public) |
| Auditor / year-end | EY · 31 March |
| Operating footprint (FY25) | |
|---|---|
| Customers | 22.6m (+15.7%) |
| Network sites | 3,704 |
| 4G population coverage | 72.5% |
| Self-built fibre | 2,717 km |
| Agents & freelancers | >250,000 |
| Smartphone penetration | 35.3% |
| Stream | FY2024 | FY2025 | Growth | % svc rev |
|---|---|---|---|---|
| M-Pesa | 456,285 | 590,033 | +29.3% | 38.9% |
| Mobile data | 347,303 | 422,181 | +21.6% | 27.9% |
| Mobile voice | 285,769 | 310,598 | +8.7% | 20.5% |
| Mobile incoming | 48,380 | 49,696 | +2.7% | 3.3% |
| Fixed | 30,745 | 42,021 | +36.7% | 2.8% |
| Digital & VAS | 38,723 | 40,296 | +4.1% | 2.7% |
| Messaging & other | 51,130 | 61,162 | +19.6% | 3.9% |
| Total service revenue | 1,258,335 | 1,515,987 | +20.5% | 100.0% |
A five-year model anchored to FY2025 actuals and the FY2026 run-rate, on conservative, footnoted assumptions. Its central feature: the roll-off of modernisation depreciation that drives the FY2027 profit inflection.
| Driver | FY26E | FY27E | FY28E | FY29E | FY30E |
|---|---|---|---|---|---|
| Revenue growth | +20.0% | +16.0% | +14.0% | +12.0% | +10.0% |
| EBITDA margin | 35.7% | 36.5% | 37.2% | 37.8% | 38.2% |
| D&A (TZS bn) | 410 | 380 | 360 | 385 | 410 |
| Effective tax | 35.0% | 33.0% | 32.0% | 32.0% | 32.0% |
| Capex intensity | 14.5% | 13.0% | 12.0% | 11.5% | 11.0% |
| TZS bn | FY25A | FY26E | FY27E | FY28E | FY29E | FY30E |
|---|---|---|---|---|---|---|
| Revenue | 1,539.4 | 1,879.0 | 2,180.0 | 2,485.0 | 2,783.0 | 3,061.0 |
| EBITDA | 493.6 | 670.0 | 795.7 | 924.4 | 1,051.9 | 1,169.3 |
| D&A | (285.4) | (410.0) | (380.0) | (360.0) | (385.0) | (410.0) |
| Operating profit (EBIT) | 208.2 | 260.0 | 415.7 | 564.4 | 666.9 | 759.3 |
| Profit before tax | 144.9 | 165.0 | 325.7 | 479.4 | 586.9 | 684.3 |
| Net profit after tax | 90.5 | 107.2 | 218.2 | 326.0 | 399.1 | 465.3 |
| EPS (TZS) | 40.4 | 47.9 | 97.4 | 145.5 | 178.2 | 207.7 |
| Net margin | 5.9% | 5.7% | 10.0% | 13.1% | 14.3% | 15.2% |
FY25A from audited Group accounts. The FY2027 step-change (+104% PAT) is driven by depreciation roll-off, not a revenue assumption — the normalisation thesis made explicit. Balance sheet (FY25): total assets TZS 2,978.0bn · equity 916.6bn · net debt 425.4bn · net debt/EBITDA 0.9× (within the <150% net-debt-to-equity policy at 46%).
Because Vodacom Group retains operating control, the plan is aligned minority influence and disciplined time arbitrage — back a capable strategy at the moment its returns are obscured, and be present when they surface.
Acquire while the FY2026 reported trough masks underlying earnings of ~TZS 92–100/share, ahead of the FY2027 inflection.
M-Pesa and adjacent services re-rate the blended margin and multiple toward a payments-business profile over the hold.
A 50%-of-profit payout converts normalisation into a rising yield on cost — from ~3% to double digits across the projection.
June 2025 DSE reforms (1-share lots, VWAP closing, tailored caps) deepen price discovery; the quality discount compresses as the float trades more freely.
Realisation in H2 FY2027–FY2030 once clean reported EPS and easing capex are visible, at a multiple consistent with African fintech-led telcos.
The thesis carries real, identifiable risks; we judge each manageable and priced.
| Risk | Severity | Mitigant |
|---|---|---|
| Depreciation drag persists beyond two years | HIGH | Even partial roll-off lifts EPS materially; cash unaffected; dividend underpins return while we wait. |
| TZS depreciation erodes USD-equivalent returns | HIGH | Underwritten in TZS; ARPU re-prices with inflation; sized within a diversified EM sleeve; hedge tactically. |
| DSE liquidity thin (~28,800 sh/day) | HIGH | Patient limit-order accumulation + negotiated blocks; multi-year hold; paced to the 5% cap band. |
| Regulatory change (TCRA / BoT, levies) | MEDIUM | Environment complex but stable; diversified revenue reduces single-rule exposure; incumbency aids engagement. |
| Competitive intensity (Airtel, Yas/Tigo, Halotel) | MEDIUM | Market leadership, largest agent network, Vodafone brand, 12-point NPS lead. |
| Single-country concentration (Tanzania) | MEDIUM | Offset by stable macro (~6% GDP, ~3.3% inflation) and an under-penetrated payments market. |
| 75% parent control — limited minority influence | LOWER | Alignment is the thesis; listed-company governance and disclosure protect minorities. |
Control is held by Vodacom Group; the opportunity is a structured minority position in the 25% free float, built with discipline appropriate to a thin, frontier-listed security.
| Term | Proposed structure |
|---|---|
| Instrument | Ordinary shares — DSE: VODA (free float) |
| Strategy | Patient on-market accumulation + negotiated secondary blocks |
| Target stake | Up to ~5–8% of issued shares |
| Entry reference | TZS 780–820/share; weighted-average via limit orders |
| Indicative outlay | ~TZS 90–140bn (≈ US$35–55m) at target stake |
| Execution window | 6–12 months, paced to the 5% daily cap band & book depth |
| Hold period | ~4 years (through FY2030E) |
| Exit | On-market into normalised liquidity; or negotiated/strategic block |
Indicative only; subject to diligence, prevailing DSE liquidity, transaction charges (~1.9% per side) and final approval. TZS/USD at illustrative ~2,600.
We triangulate intrinsic value across DCF, comparables, and a normalised-earnings multiple — then express the synthesis as a football field against the ~TZS 780 market price.
| TZS bn | FY27E | FY28E | FY29E | FY30E | Terminal |
|---|---|---|---|---|---|
| Unlevered FCF | 369.3 | 437.6 | 511.5 | 583.6 | 3,866.3 |
| Discount factor | 0.820 | 0.672 | 0.551 | 0.451 | 0.451 |
| Present value | 302.7 | 294.0 | 281.7 | 263.4 | 1,745.3 |
| Enterprise value | TZS 2,887.1bn → less net debt (425.4) → equity TZS 2,461.7bn → TZS 1,099/share (+41%) | ||||
| WACC ↓ / g → | 5.0% | 6.0% | 7.0% |
|---|---|---|---|
| 20.0% | 1,221 | 1,292 | 1,375 |
| 21.0% | 1,128 | 1,189 | 1,259 |
| 22.0% (base) | 1,046 | 1,099 | 1,159 |
| 23.0% | 974 | 1,020 | 1,071 |
| 24.0% | 909 | 949 | 994 |
Even the punitive corner (24% WACC, 5% g) of ~TZS 909 sits ~17% above market — the case is robust to a demanding discount rate.
| EV/EBITDA (FY26E) | Implied |
|---|---|
| 4.0× | 1,006 |
| 4.5× | 1,156 |
| 5.0× | 1,306 |
| Normalised P/E 8.5–10.5× | 828–1,023 |
Peer set: EM mobile-plus-fintech (Safaricom, Airtel Africa, MTN, Vodacom Group, Sonatel). Control precedents have cleared ~5.5–6.5× EV/EBITDA (~TZS 1,455–1,690), excluded from the target.
| Metric | Vodacom Tz | EM peer range* |
|---|---|---|
| EV / EBITDA (forward) | ~3.2× | 4.5–6.0× |
| Service-revenue growth | +20.5% | ~mid-teens |
| EBITDA margin | 32.1% → 35.7%E | ~38–45% |
| Net debt / EBITDA | 0.9× | ~1–2× |
| Dividend payout | 50% of PAT | varies |
*Indicative sector ranges for EM mobile-plus-fintech operators (Safaricom, Airtel Africa, MTN, Vodacom Group, Sonatel) — refresh against live quotes before execution. The standout is the EV/EBITDA discount on comparable-or-better growth with a cleaner balance sheet.
| Scenario | Exit price | Cum. DPS | MOIC | IRR |
|---|---|---|---|---|
| Downside | 1,150 | ~180 | 1.7× | ~14% |
| Base | 1,800 | ~235 | 2.6× | ~25% |
| Upside | 2,200 | ~260 | 3.2× | ~32% |
Base: depreciation rolls off through FY2027; service revenue compounds mid-teens; exit ~8.5× FY2030E EPS. Returns in TZS; USD outcomes lower by expected currency depreciation.
We recommend a structured accumulation of Vodacom Tanzania’s public free float, to a target of up to 5–8% of issued shares, at a weighted-average entry of TZS 780–820. We are buying a market-leading, cash-generative, dividend-paying franchise — with a genuine fintech rail in M-Pesa — at ~3.2× forward EV/EBITDA and ~8× normalised earnings, a 30–45% discount to comparable operators. The discount is temporary (an accounting depreciation hump) and technical (thin liquidity), neither of which impairs the underlying economics.
Arthur G. Kanza