The growth of cellular network operator Vodacom Group has continued to surge by more than 20% in all key areas of business, an important indicator of how well the South African economy is performing, chief executive officer Alan Knott-Craig said when announcing the group's annual financial results for the year ended 31 March 2007.
"Total customers increased 28.2% to 30.2 million and profit from operations by 22.5% to R10.9 billion. It is remarkable that we are still managing to achieve this growth after 13 years of operation; a rare achievement in the world of cellular networks," Knott-Craig said.
In his view, black economic empowerment (BEE) has been one of the strongest drivers of growth in the South African market. "New consumers are constantly entering the market, mostly as a result of BEE. It has been an extremely effective way of kick-starting our economy and normalising society," he said.
Commenting on the group's pending BEE deal, Knott-Craig said a large number of applications had been received for the BEE shareholding valued at R7.5 billion. "With more than 80% of our employees from previously disadvantaged groups, this deal will also enable our staff and BEE partners to share in the success of the business."
Vodacom's gross connections in South Africa increased to 10.9 million, boosting the estimated national cellphone penetration by 13 points to 84%. "We maintained our market share of 58% in a very competitive market and were not materially affected by number portability introduced last year," Knott-Craig said.
Higher growth rates were achieved in the group's activities in younger markets outside South Africa, where Tanzania is the biggest operation with 3.2 million customers, an increase of 55.3%.
"With cellphone penetration at fairly low levels of between 9% and 16%, these African operations still offer massive growth opportunities. The Democratic Republic of Congo increased by 67.5% to 2.6 million customers and Mozambique recorded 101.6% growth to reach just shy of a million customers. Lesotho has 279 000 customers, an increase of 35.4%."
The Vodacom Group's persistence in growing data revenues paid off, increasing by 64% to R3.3 billion.
"By next year we can expect non-voice products to exceed 10% of the group's revenue for the first time. In the South African market especially we will continue to focus on our non-voice offerings to maintain growth. Thanks mainly to the new SMS generation of nimble-fingered kids, our network transmitted 4.5 billion SMSes, compared with 3.5 billion in 2006," Knott-Craig said.
He added that data traffic in South Africa is growing at a rate that can't be sustained by the country's current transmission capacity. The new Electronic Communications Act has made it possible for Vodacom to provide high-speed fixed-line broadband at best cost, ensuring sufficient transmission capacity for the future.
"Because radio spectrum is a limited resource, we are following the worldwide trend of cellular networks entering the fixed-line market. We have established a new company called Vodacom Converged Solutions, which will start by building six or seven pilot optic fibre rings in metropolitan areas to create additional capacity for data growth. Converged Solutions will initially focus on the corporate market and offer a full range of services on one integrated electronic communications network, including virtual private networks, WiMax and an ISP.
"We believe that this area of business has the potential to grow bigger than Vodacom is today," Knott-Craig said.
Highlights in the Vodacom Group's financial results for the year ended 31 March 2007:
1. Total customers increased by 28.2% to 30.2 million
* Customers increased by 20.1% to 23 million in South Africa
* Customers increased by 55.3% to 3.2 million in Tanzania
* Customers increased by 67.5% to 2.6 million in the Democratic Republic of Congo
* Customers increased by 35.4% to 279 000 in Lesotho
* Customers increased by 101.6% to 988 000 in Mozambique
2. Revenue increased by 20.9% to R41.1 billion
3. Profit from operations increased by 22.5% to R10.9 billion
4. EBITDA increased by 20.5% to R14.2 billion
5. Net profit after taxation increased by 27.6% to R6.6 billion
6. Cash generated from operations increased by 25% to R13.9 billion
7. Dividends declared to group shareholders increased by 20% to R5.4 billion
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