African growth 'too expensive`

Johannesburg, 06 Dec 2007

Geographic expansion is prohibitively expensive, and so the company is focusing on growing horizontally, says Vodacom CEO Alan Knott-Craig.

"We`re not ruling out geographic expansion and are still keeping our eyes open for those opportunities that pop-up. But these are becoming very expensive and we`re not pinning our hopes on this type of expansion for our growth," he says.

Knott-Craig points to the company`s bid for a licence in Rwanda as an example.

"We came second in this bid by a large margin. And this was despite the fact that we bid a good 15% more than we knew we should have."

Vodacom has also been short-listed for a licence in Ghana, but Knott-Craig notes he is "not optimistic" about the company`s chances of success.

SA open for business

While geographic expansion sits on the backburner, Knott-Craig says the cellular operator is focused on growing its existing operations.

"When you look at Africa, SA is by far the best place to be. Everyone keeps saying the South African market is saturated, but we disagree. Our strategy is to concentrate on our established markets and get maximum value from those markets through horizontal growth," he explains.

This strategy has seen Vodacom venture into the Internet space as a tier one Internet service provider. The company also announced the inclusion of managed services for the corporate environment, from corporate hosting to virtual private networks.

Finger in every pie

Knott-Craig says Vodacom has introduced a variety of advertising platforms linked to consumer services. "Our foray into pay-TV looks promising, and the recent introduction of our own radio station for internal communication to our distribution channel and staff, and eventually to our customers by streaming, should also attract new advertising revenues."

Other advertising platforms include the "Please call me" service, a fully fledged "opt-in" advertising service, as well as two new social networking platforms.

Knott-Craig admits to being surprised by the interest shown in some of the company`s newest services. "I never thought there would be any interest in this; I certainly don`t want to get adverts on my phone. There obviously is great interest out there."

The operator`s recently released interim results show "non-core services" delivering R123 million in revenue. This constitutes 0.5% of Vodacom`s total revenue.

"We`re not going to be 'just` a cellular operator. We see vast opportunities for communications of all kinds - radio, TV, content, advertising, business services. We first need to focus on leveraging our brands in established markets before we get too hungry about extending our geographic footprint," he concludes.