Vodacom trims African capex

By Nicola Mawson, Contributing journalist

Johannesburg, 23 Jul 2009

Vodacom will not reach its planned R3 billion in capital expenditure on the continent for this year.

Speaking during a conference call yesterday, CEO Pieter Uys said the company has stopped its capital expansion in Africa, with the exception of Mozambique. Revenue from its international operations declined 8.1% in the quarter to June when compared with the same quarter last year.

Overall, the international operations recorded customer growth up 30%, to 12.6 million, compared with last year's numbers, while quarter-on-quarter growth was 4.9%.

Vodacom had previously planned to spend R5 billion in SA, which is still on track, and R3 billion in Africa. However, as a result of the tough economic climate, it has halted spending in the DRC and Tanzania, preferring to focus its efforts on the more profitable Mozambique.

“We are containing capital expenditure in Tanzania and the DRC,” said Uys.

However, while it will shift expenditure to Mozambique, Uys said it is unlikely the entire R3 billion will be spent in that country. Vodacom is targeting 50% of the market in Mozambique.

The company will “finish building the base stations it has already started”, Uys said, but no more construction will take place in the DRC and Tanzania until conditions improve.

Taxes

Revenue in Tanzania and the DRC was hit by weak economic conditions, strong competition and higher excise duties, Uys said. Stripping out the taxes, revenue would still have declined, but only by 4.2%.

Churn increased in the Tanzanian and DRC operations off the back of competitors offering low tariff deals. In Tanzania, average revenue per user (ARPU) was 3.8% lower in the local currency when compared with the previous quarter.

In the DRC, ARPU was 11.5% lower in US dollars for the quarter, as a result of shrinking disposable income, a reduction in tariffs and lower interconnection revenue.

During the quarter, the rand appreciated 3.8% and 10.1% against the US dollar and Tanzanian shilling respectively, resulting in lower reported ARPU in rands.

Both Mozambique and Lesotho delivered strong revenue growth in the quarter.

Vodacom Mozambique grew market share and churn was down 10.8 percentage points when compared with the previous quarter. However, churn in Mozambique is expected to increase after unusually high connections in December.