Vodacom service revenue declines in South Africa

Vodacom on Thursday (24 January) reported a decline in service revenue for its South African operations in a trading update for the quarter ended December 2018.

Group revenue climbed up 1.5% to R23.0 billion and service revenue was up 2.4% to R18.9 billion, but South Africa service revenue declined 0.9% to R13.9 billion.

Group customers increased 7.1% to 79 million, up 5.4% in South Africa and 9.3% in the operator’s international operations.

Vodacom said that group data revenue increased 2.2% to R6.8 billion, with international data revenue up 25.4%.

For South Africa, Vodacom said that prepaid customer growth was resilient, while efforts to reduce once-off use of SIM cards started to take effect, resulting in lower gross additions in the quarter.

“During the period, we gained 86,000 contract customers to 5.6 million, up 5.7% YoY, supported by gains in both the Consumer and Enterprise segments,” it said.

“In the period we have also seen more customers selecting from our lower value packages in order to control their spend, in the context of the weaker economic environment.”

Prepaid customer service revenue grew 0.8%, lower than the previous quarters, with increased number of customer opting for lower priced bundles with shorter validity periods, especially in data, Vodacom said.

“Data revenue was flat on the prior year, as customers used data rewards from our Summer campaign to offset their usual spend. Utilisation remains encouragingly strong, with data traffic up 41.4%,” it said.

Active smart devices on the network were up 13.3% to 20.2 million, with average gigabytes per smart device increasing by 31.9% to 1.1GB.

4G customers increased 40.5% to 9.2 million.

Vodacom said that its platform strategy, designed to stimulate reasons to consume data, is gaining momentum. “Our Videoplay platform now has over  700,000 active users paying for services, and our recently launched music platform, Muze, is steadily gaining customers.”

 

“A strong performance in our International operations helped to offset the slowdown in South Africa during the quarter,” said Vodacom Group CEO Shameel Joosub.

“Growth in revenue and service revenue at a group level increased by 1.5% and 2.4% respectively. Excluding Safaricom, we added 198,000 customers in the three-month period and now serve 79 million across the Group, having added a healthy 5.2 million customers to the Vodacom network in the past year.”

Joosub said that service revenue for South Africa was impacted by the effects of a pricing transformation strategy in order to reduce the cost to communicate, as well as the transitioning of traffic between roaming partners.

“We implemented a number of generous promotions in the quarter, including our SummerGigs campaign, in addition to the introduction of lower-priced bundled offers during the course of 2018.

“These efforts have impacted data revenue growth, as it did not yield the expected elasticity given a tougher than anticipated consumer spending environment. However, our proactive efforts to keep customers in-bundle have reduced our future exposure to out of bundle revenues.”

In our International operations, service revenue increased by 13.2% on the back of sustained data revenue growth and M-Pesa’s continued success. Our International portfolio (excluding Safaricom) now contributes 27.5% to overall Group service revenue.

The significant increase in customers in the quarter and strong commercial execution contributed to data revenue growth of 25.4% and to the 30.3% growth produced by M-Pesa.

Looking ahead, Joosub said that Vodacom will be implementing the End-User Subscriber Service Charter Regulations on 1 March, which will drag on data revenue growth in the near-term.

“However, we are particularly encouraged by the positive momentum on the regulatory front in South Africa following firm commitments by Government and the regulator to stage an auction of ‘4G spectrum’ in the early part of this calendar year, which together with the success of our pricing transformation strategy support the medium term outlook for data revenue growth.

“With an enhanced M-Pesa platform and high speed 4G now available in all our International markets, we expect the solid performance in these operations to continue gaining momentum,” he said.

Shares in Vodacom climbed by a percent on Wednesday (23 January).


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

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Vodacom service revenue declines in South Africa