South African Revenue Fuels Vodacom Growth

Growing demand for data services, particularly in South Africa, has again fueled revenue growth for Vodacom.

The revenue growth is despite the impact of reduced interconnection rates and a more competitive environment. The group’s international operations have also shown growth but have been negatively affected by Rand strength. Focus remains on Vodacom’s consumer businesses.

Vodacom reported a 4.5 percent increase in revenues to R61.2 billion for the period ended 31 March 2011 from R58.5 billion in the prior period.

EBITDA margins remained stable at 33.7 percent with the group generating R20.6 billion EBITDA in the current financial year. Operating profit improved by 21.9 percent to R13.7 billion, from R11.2 billion previously, despite a further impairment of R1.5 billion of the Gateway operations.

Vodacom generates 86.2 percent of its revenue from South Africa. South Africa has become more competitive over the last year. The entry of Telkom’s 8ta into this space, and a more aggressively positioned Cell C has resulted in downward pressure on prices and margins.

Vodacom’s increased promotional activity over the last year focused on adding value to its service offering, rather than inviting only price comparisons to its competitors’ services. The group’s rebranding to the Vodafone livery will allow it to reposition its brand message accordingly,” said Protea Hirschel, ICT industry analyst at Frost & Sullivan.

This has paid off in strong growth of contract customers, up 14.0 percent to 5.1 million, and an increase in ARPU to R157.

Growth in data services continues on its high trajectory resulting in a growing proportion of data revenues. Data revenue increased by 35.5 percent to R6.4 billion. Vodacom’s hand set strategies, particularly around smart phones, tap into the importance of these devices as a driver for data services,” Hirschel added.

Vodacom is also diversifying into other products ranging from mobile money to music downloads.

CAPEX of R5.1 billion for the South African network was geared at improving data services by upgrading base stations and expanding the self-provisioned transmission network.

Vodacom’s international operations continue to disappoint in their contribution to overall revenue with Rand strength a major factor. Hirschel adds: Further impairments around Gateway suggest that Vodacom’s African strategy on the connectivity side is not meeting initial expectations.”

However, service revenue in the international mobile operations grew by 11.6% in constant currency over the year, and 3.3 million subscribers were added to the international operations. Here too, data revenues have increased substantially.

Like South Africa, Vodacom’s international markets are increasingly competitive. This is particularly the case in Tanzania where price competition is intense, and the DRC where Vodacom has lost its market leadership position. In Mozambique a third operator is expected to go live in early 2012.

Vodacom’s DRC operations are complicated by ongoing arbitration to resolve a conflict with its equity partner.

By TelecomLead.com Team
editor@telecomlead.com