ICASA’s new data regulations hurt Vodacom’s revenue in SA

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

Vodacom has cited the Independent Communications Authority of South Africa’s (ICASA’s) recently-introduced data regulations as the reason for its declining service revenue in SA.

This morning, the JSE-listed company released a trading update for the quarter ended 30 June.

Vodacom SA service revenue has declined 1.2% to R12.6 billion, negatively impacted by the proactive reduction in out-of-bundle data rates, data usage regulations and the transition between national roaming partners, the company says.

In March, ICASA’s new regulations put an end to automatic out-of-bundle (OOB) billing and allowed users to rollover unused data, which helps keep more money in consumers' pockets.

Among the new regulations is the provision to allow users to opt-in or opt-out of OOB data charges to minimise bill shock. This as the automatic switch to out-of-bundle billing, and the huge price gap between in- and out-of-bundle prices, has been a concern for years.

“In South Africa, service revenue was negatively impacted by the further substantial reduction in out-of-bundle tariffs announced in March as part of our sustained pricing transformation strategy to bring down the prices of our data services,” says Shameel Joosub, Vodacom Group CEO.

“The impact from three months of ICASA’s data usage regulations, the transition between national roaming partners and the tough retail operating environment, were other contributors to the 1.2% decline in service revenue in South Africa.

“Acceleration in the growth in data traffic of 52%, and the 45% jump in revenue from our financial services business were among the key highlights in South Africa from the quarter,” says Joosub.

International boost

However, he says growth from the international portfolio offset the anticipated slower performance in SA, which was impacted by new data usage regulations, significant data price cuts and a subdued economy weighing on consumer spend.

The original draft regulations were first published in August 2017 to amend regulations of the same name gazetted in April 2016, with a second draft published in November 2017.

The final regulations were published on 7 May 2018 and the regulator gave operators one month to comply.

However, they were held up by a Cell C court case which MTN later joined, but the case was settled in November 2018.

Meanwhile, SA’s biggest mobile operator, Vodacom, has posted solid group revenue growth of 4.2% to R21.5 billion and service revenue up 3.9% to R17.4 billion.

Among the other highlights, Vodacom says it added 608 000 customers in SA in the quarter, 522 000 added in prepaid and the contract customer base grew by 8.9%. The company also added 560 000 customers in its international operations, up 5.3%.

Vodacom also reported strong international service revenue growth of 19.6% to R5.1 billion, supported by continued success in M-Pesa and data, the company notes.

Group data customers increased to 38.9 million, adding 1.3 million in the quarter, it adds

M-Pesa revenue increased 42.7% to R905 million, representing 17.7% of international service revenue.

“Revenue and service revenue at a group level grew by 4.2% and 3.9% respectively. Excluding Safaricom, we added 1.2 million customers in the three-month period, serving 79 million customers across the group, having added 2.4 million customers in total to the Vodacom network over the past year,” says Joosub.

“Despite the impact of cyclones Idai and Kenneth in Mozambique, international service revenue increased by 19.6%, largely driven by a 42.7% increase in M-Pesa revenue and data demand.”

He points out that M-Pesa revenue of R905 million accounted for 17.7% of international service revenue, boosted by an overall improved trend in each of the company’s international markets and Tanzania, in particular.

Spectrum hopes

Joosub added that Vodacom is encouraged by president Cyril Ramaphosa’s commitment, made in his address at the Fourth Industrial Revolution South Africa Digital Economy Summit, to award new spectrum.

“This is a vital part of reducing input costs and further bringing down data prices in South Africa, where lengthy delays in completing the digital migration and allocating 4G spectrum has curbed the pace at which data prices could have fallen. Clear policy direction for the country’s telecommunications industry is also expected to restore investor confidence in South Africa and boost economic growth.”

Looking ahead, he says Vodacom expects to conclude the acquisition of the M-Pesa brand and platform, and together with the recent launch of VodaPay, to further enhance the performance of the company’s financial services business.

“We are also encouraged by the growth potential from the IoT.nxt acquisition and AWS [Amazon Web Services] partnership agreement announced earlier this year. We expect growth in the second half of the year to improve in South Africa, benefitting from the completion of the national roaming partner switchover and improved commercial momentum in financial services.

“It is with deep sadness that we received the news that our colleague Bob Collymore, CEO of Safaricom, passed away in July. On behalf of our board and staff at Vodacom, I extend our deepest condolences to Bob’s family and all the staff of Safaricom,” he concludes.

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