Vodacom, which is facing severe top-line pressure, is gearing up for a world in which SIM cards will be in everything, and 1GB can be downloaded in as quickly as four seconds.
The operator is also looking into non-traditional mobile offerings in a bid to boost its income in a time that data is eating into voice, and income from its network is flat year-on-year. CEO Shameel Joosub says there are several inflection points that will boost growth, including data revenue growing at 20%-plus year-on-year, fibre, and financial service offerings.
Joosub says Vodacom will continue to invest in its network and - once spectrum is freed up - can turn on 4G overnight. He says, after this move, the operator will start rolling out true 4G - 4G Advanced - which provides speeds of up to 270mbps.
Among Vodacom's plans to increase its revenue stream is its fibre play, as it sees "big potential" in fibre-to-the-business, with plans to have connected 3 600 office parks by the end of March, Joosub says. In the six months to March, the operator grew overall revenue 1% to R37.5 billion -stripping out the positive effects of foreign exchange, the top-line gained 2.3% - while income earned off its network grew 1.7%, or 0.2% when currency effects are removed.
New era
Advances in fibre and long-term evolution will make it possible for businesses to emerge that have never before been thought of, says Joosub, pointing to a world in which SIM cards will be in everything. He adds Vodacom aims to tap into this shift - it already has 1.6 million machine-to-machine SIMs in its network - and is also looking at getting more involved in the accessories market. "Your network has to be ready; you've got to be ready for it."
Joosub notes the serious contenders in fibre will be the large operators, because economies of scale is required. This, he explains, is why Vodacom has put R7 billion on the table for Neotel, because when it adds Neotel's 16 000km of fibre onto its own backhaul, it gets closer to buildings. And when fibre gets closer to buildings, it makes it more feasible to light up offices. That deal is still progressing through regulatory approvals, although Vodacom expects it to be wrapped up by next March.
Data drive
Vodacom's data push is a bid to help stem the declining use of voice, which saw revenue from this segment decline 4.9% locally, although it is still a growth area in its international operations, gaining 6.5% in the first half. A year ago, voice overall gained 2.6%, but in the six months to September 2014, lost 2.4%, while data is continuing to grow at the 20% and above range.
At the same time as voice use is dropping, and data gaining, the cost for each unit is dropping. Vodacom's contract costs have come down 10% in the past year, while the cost of voice has dropped 40% in the past two years, and data has become 50% cheaper in the same time, Joosub notes.
Despite the price drops in voice, this service will never be free because operators need to make money so they can invest in the networks, says Joosub. If they cannot invest, "then it's just sideways", he adds.
Out of the ordinary
Vodacom is also looking at adding new products to its current handset insurance offering, such as funeral cover and life insurance, says Joosub. He notes the business gained 35% year-on-year, and annualised, is now worth R300 million. "That will grow over time."
The operator, SA's largest, is also expanding into over-the-top apps, such as its Voucher Cloud offering, which gives subscribers discounts to products. So far, says Joosub, more than R60 million-worth of products have been moved through the app.
Joosub adds Vodacom, which also offers the music service, Deezer, is looking to extend its content offerings and is pondering video-on-demand, which its fibre plan will make possible. He says Vodacom will selectively play in this space where there is money to be made.
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