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Spectrum frustration as Vodacom cautions against delays

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 02 Feb 2021
Vodacom Group CEO Shameel Joosub.
Vodacom Group CEO Shameel Joosub.

Frustration is bubbling over spectrum allocation, with Vodacom CEO Shameel Joosub bemoaning potential delays in the progress towards the much-awaited auction of the spectrum.

The long wait for spectrum has persisted for several years and the planned auction in March is facing obstacles, due to recent multiple court applications brought by Vodacom’s competitors, MTN and Telkom, and broadcaster Etv.

The spectrum auction, pencilled in for March, has been put under the spotlight in recent weeks amid growing opposition to the process from some sections of the industry.

MTN, Telkom and Etv are all in court challenging some aspects of the process being managed by the regulator, the Independent Communications Authority of South Africa (ICASA).

Etv filed an intervention application in support of the Telkom suit, warning that if ICASA goes ahead with licensing the “digital dividend” spectrum bands at 700MHz and 800MHz, it will be directly prejudiced.

Presenting Vodacom’s quarterly trading update today, Joosub said:“Any further delays to this process will likely have a negative impact on consumers.

“Participating in the Independent Communications Authority of South Africa’s high-demand spectrum auction is a key strategic priority for the group in the quarter ahead. We see the assignment of spectrum as instrumental in extending coverage, improving quality of service and lowering the cost to communicate in South Africa.”

In December 2020, Vodacom was among the six telecommunication companies that submitted applications and were shortlisted by the regulator.

“We welcome progress on spectrum assignment, seeing it as instrumental in extending coverage, improving quality of service and lowering the cost to communicate in our largest market,” says Joosub.

In the period under review, Joosub says, in SA alone, Vodacom invested R2.7 billion to support data demand and shifts in customer behaviour patterns with a need to work, entertain and educate from home.

Further, the mobile network operator invested R3.4 billion in its network across the group in the quarter – including the expansion of 4G coverage, speeds and capacity.

SA leads the pack

Driven by the results from its South African operations, which marked its third consecutive growth, Vodacom reported an increase of 4.2% in group service revenue, on a normalised basis, which Vodacom says was supported by its ongoing investment into an ecosystem of connectivity, financial and digital services.

“This ecosystem approach promotes engagement with customers and creates more opportunities to add value. In South Africa, service revenue grew 5.4%, with both our consumer and Vodacom Business segments contributing to growth, despite our material data price reductions on 1 April 2020.”

In SA, Vodacom’s mobile contract customer revenue crept up 1.6% to R5.2 billion; in the prepaid segment, mobile customer revenue increased 9.4%.

Prepaid net additions were at 1.4 million, with Vodacom crediting its summer campaign.

Data traffic increased 43.2%, as the growth trend normalised with eased lockdown restrictions for most of the quarter, says the company.

“Data customer net additions were 0.2 million in the quarter as we reached 22.5 million customers and smart devices on our network were up by 4.5% to 23.5 million. The number of 4G devices on our network increased 24% to 15.1 million, while the average usage per smart device increased 34.9% to 2.1GB per month,” Joosub says.

Financial services balloon

Turning to the contribution by Vodacom’s financial services, Joosub says revenue generated by the unit was up 24.3% to R619 million in the quarter, while customers increased 23.8% to 13.1 million.

“Revenue growth was underpinned by our Airtime Advance product, where we advanced R3.1 billion in airtime, an increase of 27.7%. The number of Airtime Advance customers increased 26.5% to 10.7 million. In the insurance space, policies increased 11.2% to two million.

“In partnership with Alipay, we continue to develop our single lifestyle app, VodaPay, which will further promote financial inclusion for our consumers and merchants.”

Vodacom Business service revenue grew 6.1% to R3.9 billion in the quarter, with corporate and university data demand moderating from the elevated levels recorded in the first six months of the financial year.

Vodacom Business fixed-line revenue grew 10%, excluding wholesale transit business, which the telco says was supported by strong growth in cloud and hosting and connectivity revenue.

Internet of things connections were up 18.8% to 5.6 million, with revenue increasing 39.1% to R313 million.

In the period, Vodacom fibre customers more than doubled year-on-year to 110 000 homes and businesses connected. Joosub notes that Vodacom-owned fibre rollout continued, and it passed 139 000 homes and businesses as at 31 December 2020, up 39.8%.

More M-Pesa

Turning to M-Pesa, Joosub says revenue for international was up 10.1% to R1.2 billion in the quarter, with normalised revenue growth improving to 7.8%.

He explains: “The improvement in the third quarter normalised growth rate relative to the six-month period ended September 2020 was supported by a reinstatement of peer-to-peer (P2P) fees in Mozambique during October 2020 and ongoing platform adoption as customers and governments embraced digital ways of working.

“Further, the DRC reinstated P2P fees in January 2021, supporting the growth outlook for international M-Pesa revenue. In the quarter, M-Pesa customers across our international operations increased 7.7% to 16 million, representing 46.9% of our customer base. Monthly M-Pesa transactions, including Safaricom, was US$24.2 billion, up 57.8%.”