Vodacom cautions on RICA

Johannesburg, 23 Jul 2009

SA's largest cellular provider, Vodacom, said it grew its customer base by 19.5% in the first quarter of the year to June.

However, the Regulation of Interception of Communications and Provision of Communication-Related Information Act (RICA) will trim penetration in SA, said CEO Pieter Uys.

RICA requires that all SIM card owners be registered. New cards sold from 1 August must be registered, while contract customers have 18 months to hand over proof of registration and ID books to operators. The Act came into effect on 1 July, but there is a month grace period.

The Act will result in gross connections slowing, but should also limit the effects of churn, as consumers may feel less inclined to swap providers and go through the process twice, Uys said.

In SA, customer growth continued, with 1.1 million customers added during the quarter, a 15.4% increase on the previous year and 4% higher that the last quarter. Vodacom now has 28.7 million customers in SA.

The company yesterday announced its first quarterly results since listing. During a conference call, Uys said Vodacom grew its total mobile customer base to 41.3 million during the quarter.

The local operations contributed 69.6% of this growth. Overall revenue improved 12.2%, to R14.2 billion, compared to a year ago, the company said in a statement.

Uys said organic growth contributed 5.9%, while its Gateway acquisition added R800 000 in revenue. Vodacom announced its $700 million purchase of Gateway last August, which gave the cellular company control of Gateway's carrier services and business network solutions divisions.

Cut off

Vodacom has already spent about R20 million on servers to accommodate the details it must store in order to comply with the Act. Uys said more would have to be spent to acquire space to keep records as these grow.

In addition, Vodacom will spend R3 on each new subscriber it registers. The money will be paid to independent agents who are registering users on the company's behalf.

Uys said the cellular company might have to turn off SIM cards belonging to non-South Africans who cannot provide the required documentation. This will drop penetration levels to between 100% and 130% of the population. Uys could not say what penetration may have been without the Act, due to the unknown amount of foreign nationals in the country.

At the end of the calendar year, the company intends taking stock of the process and discussing with government how to avoid turning non-registered subscribers off. “We don't want to harm the industry,” Uys said.

Local view

South African revenue grew 8.2% year-on-year, despite the economic slowdown. The weaker trading conditions impacted contract revenue as customers managed bundles more effectively, Uys said. In addition, there were several public holidays in April, which placed pressure on revenue.

Yebo4Less customers increased from 4.8 million, at the end of March, to 7.2 million at the end of June. These cellular users now make up 29.3% of the prepaid customer base.

Uys added that targeted loyalty programmes reduced overall churn by 2.4 percentage points, to 34.1%. However, average revenue per user (ARPU), on a blended basis, declined 4.7% from the previous quarter, as a result of higher penetration in lower income market segments, lower revenue in April and weaker economic conditions.

Prepaid ARPUs were relatively stable at R64 a month, compared to R65 per month in the previous quarter. Contract customer ARPU was 3.5% lower than in the previous quarter, as customers limited spending outside their bundles.

“We expect customer growth to slow in the remaining quarters as customer registration is now required in our three largest markets,” said Uys, adding that Vodacom remains focused on maintaining its market share, stimulating usage and containing costs.

“Things are definitely tougher than they used to be.”