Vodacom on Monday (10 November) reported a 1.3% drop in service revenue for its South African operation, in interim results for the six months ended September 2014.
Revenue for SA, was flat (0.1%) at R30.171 billion.
The mobile operator pointed to a 50% drop in Mobile termination rates (MTRs) in the period which led to a 42.2% decline in interconnect revenue.
Call termination rates are the fees telecommunications operators charge each other to connect calls to one another’s networks.
“The impact of the lower MTRs was to reduce service revenue by almost a billion rand. Excluding this impact, South Africa would have seen service revenue growth of 2.9%,” said Shameel Aziz Joosub, Vodacom Group CEO.
Group revenue meanwhile, increased by 2.3% to R37.546 billion and service revenue by 1.7% to R30.725 billion.
Vodacom said international operations now contribute 24% of service revenue, up from 21.6% a year ago.
In South Africa, operating profit declined 7% to R8.504 billion due to lower EBITDA as well as an increase in depreciation and amortisation as a result of a 35.3% increase in capital investment.
International operations’ operating profit grew 13.5% to R957 million, the operator said.
Group headline earnings per share dropped 5.5% to 415 cents, from 439 cents per share in 2013.
Equipment revenue growth slowed in SA as the volume of handset finance deals began to stabilise year-on-year. Overall volumes reduced slightly to 4.5 million devices sold in the period.
Data revenue grew strongly at 21.6% to R6.198 billion. Data now makes up 26.4% (2013: 21.5%) of service revenue.
“More than half of our customer base now actively uses data and data traffic increased 75.2% in comparison to last year. We reduced our effective price per megabyte by 30.4% through our bundle strategy and by introducing lower priced time based bundles. The number of bundles sold doubled from a year ago,” Vodacom said.
The average amount of data used per smartphone increased 55.4% to 336 MB per month.
Average monthly usage on tablets increased 28.9% to 879 MB. The number of active
smartphones and tablets on the network increased 22.3%, to 8.6 million, the group said.
The number of contract customers remained stable at 4.8 million, while prepaid active customer base grew 9.8% to 27.8 million, an increase of 2.5 million customers in 12 months, Vodacom said.
The International businesses achieved strong customer growth of 19.8%, taking the total number of customers to 28.4 million.
Service revenue grew 13.0% to R7.366 billion. Overall growth was impacted by intense price competition and regulatory challenges.
Data revenue grew 41.0% to increase the contribution of data to 18.9% of service revenue.
“Excluding m-pesa, mobile data revenue grew 52.2% supported by a 51.5% increase in active data customers to 9.2 million, or 32.4% of our customer base. We recently launched a low cost smartphone and a tablet in all our operations, with good early traction in sales,” Vodacom said.
M-pesa added 1.1 million customers in the six month period, increasing the number of active customers to seven million, an increase of 25.9% from the prior year.
The group capital expenditure increased by 21.3% to R5.88 billion or 15.7% of revenue due to an accelerated capex programme.
“We have faced tough macroeconomic conditions in all markets, increased competitive intensity, and have also seen a significant impact from lower mobile termination rates
(‘MTRs’) in South Africa,” said Joosub.
“To clearly differentiate Vodacom’s services, we invested R4.1 billion in the network in South Africa. We added over 1,000 new LTE base stations and 745 new 3G sites. This additional capacity supported the 18% increase in outgoing voice traffic and 75% increase in data traffic,” he said