Government-imposed disconnections of unregistered SIM cards in the Democratic Republic of the Congo (DRC) cost Vodacom about $300 000 (R4.7 million) a month in lost revenue.
This is according to Vodacom group CEO Shameel Joosub, speaking to ITWeb after the telecoms operator's financial year-end results presentation in Johannesburg this week.
The DRC government ordered mobile operators to disconnect all unregistered customers in December 2015, in line with new subscriber registration legislation. This saw Vodacom lose almost 3.3 million customers quarter-on-quarter in the country. As at 31 March 2016, Vodacom had 8.5 million customers in the DRC, a 24% drop from a year ago.
Vodacom says the registration requirements meant it had to suspend customers with no registration records and communicate to these customers the requirement to register to avoid disconnection.
"I think the only saving grace is that obviously it's happened across the industry so everyone has been impacted by the same thing; so then the industry has almost got to start again and re-acquire those customers," says Joosub.
He notes Vodacom is regaining the suspended customers, but it could take some time.
"When you put stringent rules in place, the channel first has to get used to those rules, so what happens is you see a slow recovery every month and a build-up in terms of getting back to those gross numbers.
"What it also impacts is cutting off fictitious connections, so you might settle at a lower gross number but your net will improve, so I think that is the most important part of this."
A similar process in Mozambique saw Vodacom's customer numbers in the country drop by 414 000 quarter-on-quarter, to 4.8 million.
"In Mozambique, there has been phased suspension since November 2015 and a disconnection programme for unregistered customers agreed by the government and operators," according to Vodacom.
Overall, the group's international operations saw active customers decrease 8.1% to 27.1 million. Despite the South African operation adding 2.1 million subscribers, the overall group subscriber numbers still fell slightly to 61.3 million year-on-year.
"We would have had a strong growth in customer numbers because we had 6% growth in SA and the international numbers are usually higher than SA. So we would have had at least 10% overall group growth, but that has been impacted down to flat growth because of the suspension or deletion of customers," explains Joosub.
However, the lost revenue from the suspended users is a much lower price to pay than the possible fines that could be imposed for non-compliance.
"I think it's extremely important to work tightly with the security agencies to make sure you are complying and that when government takes a decision that you fully comply, because otherwise you just land yourself in trouble," according to Joosub.
Trouble is exactly what rival operator MTN found itself in, when it failed to meet a regulatory deadline to disconnect unregistered SIM cards in Nigeria. In October, MTN was fined around R15 000 per SIM card not cut off, in a record $5.2 billion (R81 billion) fine. The fine was later reduced by 25% to $3.9 billion (R61 billion) and a settlement is yet to be reached over six months down the line.
Opportunity for growth
Joosub says Vodacom still sees big growth opportunities in its international operations.
"If you are looking at your data penetration, it's still very low in terms of the international markets, below 50%. So I think there is a lot of opportunity to still grow data.
"We have not launched 4G in most of our markets. We have only just launched it in Tanzania and in Lesotho so I think there is a lot of opportunity still from 4G growth and if we can achieve similar numbers to what we have seen in SA, I think there is a lot of growth still left in these markets."
For now, Vodacom does not plan to expand to any more markets beyond the five it operates in: South Africa, Tanzania, Mozambique, Lesotho and the DRC.
"We are always looking at opportunities and as they come up we evaluate them. What we are clear on is that it's not what I call 'a flag-planting exercise'. Opportunities have to be cash-generative and add value to the group."
Joosub still believes the biggest opportunity at the moment will come from capitalising on Vodacom's existing businesses. This includes Lesotho, where subscriber numbers grew over 10% in the past year, to almost 1.4 million.
"Lesotho is one of the countries where we have 3G coverage everywhere and we have now launched with 4G coverage, but I don't think we have fully captured the opportunities. Data penetration is still very low, under 20%, so there is a lot of opportunity to grow and get better devices into people's hands."
Vodacom also has 12.4 million subscribers in Tanzania, up 1.7% from a year ago.
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