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Vodacom focuses on infrastructure

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Over the past year, the Vodacom Group has emphasised the need to improve infrastructure as it lays the foundation to improve service quality. In its first full year under the new brand, the group’s international operations delivered a solid performance while the company stated its intent to finally dispose of its Gateway carrier business.

Today, Vodacom released its financial results for the year to 31st March 2012. The group’s total service revenue increased by 7.8% to R58.2 billion. This was driven largely by data services and international operations, which contributed to 87% of the revenue growth. Data revenue grew by 23,6% to R7,6-billion while revenue from internal operations increased by 22,4%. Group EBITDA rose by 10,5% to R22,8-billion for the period and headline earnings were 709 cents, increasing by 8,1%.

“The market for data subscribers is heavily contested by the operators, based mainly on competitive pricing”, according to Frost & Sullivan ICT analyst Lehlohonolo Mokenela. “The market could witness an intense price war as the local operators jostle for market share.”

Over the reporting period alone, competitive pressures  saw Vodacom cut its data prices by over 18%. Mokenela believes that this could put a squeeze on Vodacom’s margins in the next period, but expects higher usage to drive revenue growth.

Vodacom’s international operations in Tanzania, DRC, Mozambique and Lesotho continued to post impressive numbers. They contributed 17.4% to the group’s  service revenues compared to 14,7% the year before. The 27,5% increase in revenue came on the back of a higher subscriber base, which rose by 35% to 18,9-million subscribers.

The group’s financial services product, M-PESA, enjoyed more success over the period in Tanzania, which added 1,8-million active subscribers. The service contributed 8,5% to Tanzania’s service revenue compared to 2,8% the year before.

The disposal of Gateway is under way following a few periods of disappointing performances from the carrier business. However, the resolution of the company’s shareholding in the DRC operations remains a cause for concern. The company seems reluctant to release the assets despite the 3 June deadline set in the court order.

The South African operations generated R48,2-billion in revenue, a growth of 4,4% for the year despite a 27% growth in subscriber numbers. This was attributed to the 14.2% drop in ARPU as a result of the rising number of low end usage subscribers and lower termination mobile termination.

“With mobile services in South Africa ranking amongst the least affordable in Africa, there is still scope for more price reductions,” says Mokenela. “We can expect to see further price cuts in the coming year and subsequently lower ARPUs unless this is matched by a sizeable increase in traffic.”

Vodacom continued its aggressive investment programme geared towards improving its network. CAPEX was up 37,3% for the period to R8,7-billion as the operator installed 973 new 3G base stations in South Africa to bring the total to 5 263 3G base stations.

A dividend of 540 cents per share was declared.