SA's largest cellular operator, Vodacom, has little more than five months in which to make sure 8.2 million of its local subscribers are registered, or it will face losing almost half of its local base due to the SIM card registration Act.
Vodacom has already cut off 3.3 million South African subscribers in the first three months of its financial year, after changing the amount of time a SIM card can be inactive on its network before being cut off.
The company this morning provided a trading update and said total revenue for the three months to June had dropped from R14.44 million in the last quarter of its previous financial year, to R14.4 million in the first quarter.
However, year-on-year revenue improved 0.7%, with South African revenue growing 3.8% from last year. Its customer base in SA has continued to decline. A year ago, the company had 28.7 million subscribers, which has declined to 23.2 million.
Quarter-on-quarter, Vodacom has lost 3.3 million subscribers after it dropped the amount of time a SIM card can be inactive from 13 months to seven. However, it added 200 000 net subscribers during the three months.
Deadline concerns
CEO Pieter Uys says the company has spent R30 million on systems to comply with the Regulation of Interception of Communications and Provision of Communication-Related Information Act (RICA). In addition, every subscriber that has their details captured to comply with the Act costs the cellular operator R3.
So far, says Uys, about 15 million subscribers, or just over half of Vodacom's base, have been registered. The balance must be registered by year-end to avoid being cut off from the network. Uys says it will be difficult to get the last few millions of customers registered.
However, the industry is lobbying government for an extension of the deadline. Uys says, so far, Vodacom has written to the Department of Communications, providing evidence of its RICA experience. He hopes to have a meeting with the department, but no date has been set.
Data drives
Uys says overall service revenue growth was “good”, despite the change in mobile termination rates costing the company R393 million in revenue. The Soccer World Cup boosted revenue by about R45 million, as tourists roamed on the Vodacom network or bought prepaid starter packs.
However, the company has gained traction with its data offerings, and Uys says it has made “excellent” progress in this area. Group data revenue grew 43%, to R1.35 million, and Vodacom rolled out another 230 3G base stations, with plans to deploy a total of 1 000 stations during the year.
Internationally, its operations are stabilising, says Uys, and the company added another million customers to its base, to take its total international subscriber base to 14.56 million. However, while international revenue grew during the quarter, converting the currencies back into rands resulted in a 15% revenue decline, due to the strength of the local currency, explains Uys.
Frost & Sullivan ICT industry analyst Spiwe Chireka says: “2010 is going to be a tough year for Vodacom.”
She points out that Vodacom has had to deal with the effects of RICA on its customer base, which spilled over into is revenue base.
However, Vodacom will recover from RICA faster than the effects of mobile termination cuts, which could cost the company as much as R1 billion by the end of the year, estimates Chireka.
“Frost & Sullivan believes Vodacom needs to expand and do so fast. The group's current operations are not performing well, and they need to mitigate and diversify that risk, or run the risk of holding on to a few bleeders,” Chireka adds.
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