Vodacom revenue boosted by customer growth

Vodacom on Wednesday announced a 6.7% rise in group revenue to R22.6 billion, in a trading update for the quarter ended December 2017, while service revenue was up 5.5% to R18.4 billion.

The group said it added 2.5 million active customers during the quarter, 1.6 million in South Africa and 900,000 in its International operations, to now reach 73.6 million active customers across the group, up 13.0% year on year.

Group data revenue increased 9.7% to R6.6 billion, while International data revenue was up 19.5%, it said.

South Africa service revenue grew 4.9% to R14.1 billion, supported by strong customer gains and data revenue growth

“Our strategy of sustained investment into our network and improving customer experience has delivered solid gains in customer numbers in South Africa, and driven growth in our International operations, resulting in stronger growth in group revenue of 6.7%.

“In South Africa, our customer base grew 14.4% to 41.6 million, contributing to the 6.2% increase in revenue, underpinned by a resilient pre-paid voice market and a highly successful summer campaign,” said Shameel Joosub, Vodacom Group CEO.

“During the quarter we delivered on our promise to reduce out-of-bundle data prices, evidence of our commitment to reduce the cost-to-communicate through our pricing transformation journey; this resulted in a 24.2% decline in effective data prices for the year.”

In order to compensate for the expected shortfall in revenue, Joosub said that the group has undertaken a range of initiatives to stimulate usage. “Monthly trends towards the end of the quarter show that this is having the desired effect,” he said.

“Driven by strong customer growth, a solid performance from M-Pesa and sustained demand for data, our International operations continue to gain momentum. Data revenue grew 19.5%, supported by our strategy to increase smartphone penetration through improved device affordability. Further new services contributed to a 33.3% jump in revenue from the M-Pesa mobile money platform,” the chief executive said.

Growth was further supported by an 11% increase in customers, resulting in revenue from International increasing by 9.3%, a third consecutive quarter of accelerating growth, Vodacom said.

In South Africa, Vodacom said it added 1.5 million prepaid customers during the quarter, with prepaid active customers up 16.3% year on year. The increased customer base has supported prepaid customer revenue growth of 6.8%.

Contract customers increased by 81k, “which was strong despite slower sign-up of new departments as part of the government tender that we won in September 2016,” Vodacom said.

Contract ARPU declined 5.1% to R393, an improvement in the trend from Q2. “This improvement reflects the rebalancing of contract deals, by reducing discounts on subscriptions. This was partly offset by higher roll over of unused data bundles as we continue with the migration of customers to ‘more data’ contracts, as well as the revenue effects from the reduction of out-of-bundle data rates,” the operator said.

Data revenue grew by 8.7% (Q2: 12.2%) to R6 billion, contributing 42.3% of service revenue. Data customer growth of 6.4% was strong, adding 598k customers in the quarter. Data traffic growth remains robust at 43.9%, slightly down from the previous quarter as a result of commercial steps taken to reduce free data usage, following the end of promotional offers during the quarter, Vodacom said.

“Our bundle strategy continues to deliver growth with in-bundle data revenue growth trends improving, supported by growth in bundle sales of 53.8%. In a continued effort to improve customer experience and exposure to out-of-bundle data revenues, we reduced out-of-bundle data prices by as much as 50% from 1 October 2017.

Vodacom said that the slowdown in data revenue growth in Q3 was driven by these lower out-of-bundle data revenues, reflecting the reduction in these rates, as well as continuous improvement in moving customers to more
affordable bundles aligned with customer usage.

“We note an improvement in the in-quarter growth trend, with December growth recovering to >13% providing evidence that elasticity is returning, supported by commercial actions such as price adjustments on data bundles. Overall effective price per megabyte was down 24.5%.”

Enterprise service revenue grew 9.7% now contributing 25.5% of service revenue, supported by increases in wholesale revenue and fixed service revenue. “Fixed service revenue growth was strong at 23.6%, driven by connectivity revenue and cloud and hosting services,” Vodacom said.

During this quarter, Vodacom said capital expenditure of R2.3 billion was focused on maintaining its network advantage, as well as enhancing its IT systems and deep learning machine capabilities. The group said its network has now reached 77.6% 4G population coverage, while 3G covers 99.4% of the population.


Read: South Africa’s best mobile network: Vodacom vs MTN vs Cell C vs Telkom

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