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Vodacom adds 2.7m subscribers

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Shameel Joosub, Vodacom Group CEO.
Shameel Joosub, Vodacom Group CEO.

SA’s biggest mobile operator, Vodacom, has added 2.7 million subscribers in the six months ended 30 September.

The company announced its interim results this morning, saying group revenue was up 3.9% supported by group service revenue growth of 4.2%.

“We added 2.7 million customers in South Africa and our international operations, and 2.7 million in Safaricom during the period, to serve a combined 115 million customers across the group,” the company says.

In its trading update for the quarter ended 30 June, Vodacom cited the Independent Communications Authority of South Africa’s data regulations as the reason for its declining service revenue in SA.

However, this time Vodacom SA’s service revenue grew 0.3%, supported by the turnaround to growth in the second quarter, as the reduction in out-of-bundle revenue was offset by improved data elasticity and the completion of the full onboarding of a new roaming partner, the company says.

In November last year, Vodacom and Telkom announced a roaming agreement allowing Telkom customers to roam on Vodacom’s network.

Foreign factor

Vodacom adds that international operations continue to perform well, delivering service revenue growth of 15.5%, with foreign currency translations boosting reported group growth.

Earnings per share were up 19.4% while headline earnings per share were up 18.9%, due to the one-off black economic empowerment (BEE) costs of R1.5 billion (including transaction costs) included in the prior period.

The company declared an interim dividend of 380 cents per share (cps) and a special dividend of 60cps.

“Following last year’s substantial investment in South Africa’s largest-ever broad-based black economic empowerment transaction in the telecommunication sector, this year Vodacom Group posted an 18.9% increase in headline earnings per share to 460c and returning a dividend of 440cps to shareholders,” says Shameel Joosub, Vodacom Group CEO.

He notes that other key highlights include an improved second quarter performance in SA and the sustained growth of the company’s international businesses.

“In South Africa, an increase in data usage, following sustained efforts to reduce data prices and the onboarding of our new roaming partner in the second quarter, more than offset the service revenue decline reported in the first three months of the financial year,” says Joosub.

On a like-for-like basis, he adds, this resulted in service revenue growth of 1.5% during the half year, despite ongoing economic pressures and the implementation of the end-user and subscriber service charter regulations.

“Having announced sharp reductions in out-of-bundle tariffs by up to 70% in March, we continue to drive down the cost to communicate through various initiatives.”

These include the recent introduction of a Vodacom-branded 4G smart feature phone priced at R299, and reducing the price of 1GB of data valid for 30 days from R149 to R99 for users of Vodapay and the MyVodacom App.

Joosub points out that ongoing initiatives to enhance customer experience through pricing transformation, modernisation of IT systems and sustained investment in network infrastructure, continue to pay dividends.

He explains this is evidenced by the additional 691 000 customers who joined Vodacom in the period.

There are now 43.9 million customers connected through Vodacom’s network, he says.

Changing it up

According to Joosub, measures to introduce “one more service” to customers, as part of Vodacom’s strategy to build diverse revenue streams, are quickly gathering momentum.

“Revenue from our financial services business jumped by 37.1% to almost R1 billion, as Airtime Advance, insurance and our recently launched VodaPay service all gained in popularity.

“More than one million people have made video-on-demand purchases, while our music, sports, games and other video services – all in their infancy phase – are contributing to solid growth in our digital services business.”

“Our international portfolio remains a star performer, growing service revenue by 15.5% in a period characterised by macro and political stability and high demand for data and M-Pesa services in each operation. We connected an additional two million customers, boosting the total to 36.6 million customers outside South Africa and Safaricom,” says Joosub.

He says M-Pesa customers in the international markets now process more than $2.8 billion a month in transactions through the service, “underpinning M-Pesa’s promise of delivering financial inclusivity and positively contributing to economic growth in countries where it has become ubiquitous”.

Initiatives to further expand the M-Pesa ecosystem contributed to the 797 000 increase in customers, up to 14.3 million.

“Looking ahead, we expect the benefits from our acquisition of a strategic stake in IoT.nxt will become increasingly evident in both our consumer and enterprise businesses,” Joosub notes.

“The same can be said for the other partnerships we have put in place in recent times, including our agreement with Amazon Web Services, to ensure we bring best-in-class services and products to customers right across the group.”

Vodacom will also expand M-Pesa internationally and its financial services and digital lifestyle businesses in SA with the expectation that these will increasingly contribute to revenue growth.

“In South Africa, a key focus remains on the policy and regulatory environment where we will continue to participate in the various processes currently under way to assign available high-demand spectrum.

“While we have made significant progress in our pricing transformation journey, spectrum availability is a key lever to accelerating data price declines,” he concludes.

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