Vodacom boosts profit as it hits 40 million subscribers in SA

Vodacom has reported strong revenue growth for the interim period ending 30 September 2017, showing growth of 4.6% to R42.0 billion.

Normalised growth, excluding currency translation effects, was 6.9%, while group service revenue grew 2.0% to R34.7 billion.

South Africa revenue growth accelerated to 7.7% boosted by stronger device sales, it said.

Net profit increased 7.0% to R6.712 billion, boosted by the Safaricom acquisition, Vodacom said. It concluded acquisition of 34.94% interest in Safaricom, contributing R349 million profit for first two months, including amortisation of fair valued assets.

Headline earnings per share (HEPS) up 1.1% to 445 cents per share, and the company declared an interim dividend per share of 390 cents.

Group EBIT declined 0.2% (-1.4%) to R10.8 billion, impacted by higher growth in depreciation and amortisation charges, though Vodacom said it added 4.3 million customers during the first half of the year – 2.9 million of which were in South Africa, which now has a total of 40 million Vodacom subscribers (up over 12%).

Prepaid customers increased by 2.8 million to 34.8 million, up 13.4%, which was driven by the success of  the ‘Just 4 You’ offers and customer segmentation, the group said.

However, prepaid ARPU (average revenue per user) was down 6.5%, as a result of high volumes of low gross connections, driven by the distribution channels accelerating the
connection of sim cards ahead of implementation of improvements to customer registration processes.

Contract customers increased by 107,000 in the time period, up to 5.2 million.

Contract ARPU declined by 3.9% to R392 as a result of change in deal structures and due to a higher rollover of unused bundle allocations, as customers grow into fully utilising these larger bundles over time and also reduce their exposure to out-of-bundle usage, the group said.

“We now also have 3.3 million sim card connections in our Internet of Things offerings,” said Vodacom CEO, Shameel Joosub. “This growth in both areas shows that our segmented markets approach and the delivery of greater value through innovative personalised bundles is continuing to produce results.”

The further 1.4 million subscriber additions in its international operations, means group subscribers have reached just over 71 million. customers across the Group, up 11.8%.

 

“Looking ahead, our strategy to become a leading digital company and empower a connected society remains a key focus. We anticipate that our investments in big data and sophisticated machine learning will increasingly allow us to provide customers with relevant Just 4 You propositions. In turn, this should continue to drive revenue and customer growth across all markets,” Joosub said.

Data in South Africa

Data revenue grew 15.0% to R11.4 billion, contributing 42.6% of service revenue surpassing the contribution of voice revenue.

This was slightly down in the second quarter as a result of a strong comparative quarter and the introduction of promotional initiatives, such as Meg Your Day, to drive data uptake.

“Encouragingly, this has enabled an expanding customer base and increased usage,” Vodacom said.

The company added 356,000 data customers in South Africa to 19.9 million, up 9.6% – or half of the mobile customer base. 4G customers on its network increased 62.8% to 6.0 million, while the average monthly data usage on smart devices increased 19.5% to 776MB.

“Our pricing transformation strategy and targeted personalised offers continue to provide customers with greater value,” it said.

Data bundle sales grew by 55.5% to 347 million, and the group said it has introduced new initiatives to improve the customer experience on out-of-bundle-data spend, and is “driving data-usage education to give customers more control”.

Improved in-bundle usage has resulted in a 24.2% reduction in the effective price per MB, Vodacom said.

Reducing data prices

“We have consistently said throughout the year that we would accelerate the reduction in data prices and address out-of-bundle prices,” the group said in its shareholder statement.

“These are promises that we have delivered on, with effective data prices decreased by 24.2% during the six-month period. On 1 October 2017 we further reduced out-of-bundle prices by up to 50%.

“We have managed to do this while continuing to invest significantly in infrastructure at a time when the lack of available spectrum is pushing our costs higher.”

According to the group, the biggest stumbling block behind high data prices remained the limited spectrum available to it.

“Without new spectrum we are forced to build more base stations to meet data growth demand.”

“Additional spectrum will allow us to invest more efficiently and accelerate our rural coverage programme. Over the six month period, we invested R3.9 billion to maintain our network lead and enhance our IT systems.”


Read: Vodacom and Nokia to trial 5G in South Africa

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Vodacom boosts profit as it hits 40 million subscribers in SA