Cuts in mobile termination rates (MTRs), a weak economic environment, exchange rate volatility and increased price competition are the main culprits for a 4% slump in Vodacom’s HEPS and an 8,5% drop in net profit but, despite this, group CEO Shameel Joosub remains distinctly upbeat about the company’s future.
“The key highlights of our story for the year were network investment, data growth, and pricing transformation,” Joosub says.

“This played out against a tough backdrop. In South Africa we faced major cuts in mobile termination rates, a weak economic environment, exchange rate volatility and increased price competition. In Tanzania and the DRC, pricing pressure impacted our performance. Despite these challenging conditions, we increased the Group customer base by 7,2% to 61,6-million and grew revenue by 2,1% (1,1%) to R77,3-billion.”

Headline earnings per share reduced 4% to 860 cents.

“In South Africa we’ve attracted the majority of contract customers to integrated packages and established the value bundle approach within the prepaid segment, which has in effect rebased our pricing. This resulted in a 17,7% reduction in the blended average effective price per minute for calls, and a 24,1% reduction in the average effective price per MB of data.”

A second significant change was the 50% reduction in MTRs which was a major contributor to the 2,7% decline in service revenue in South Africa. Excluding the MTR cuts, service revenue in South Africa grew 1,5%.

“With these adverse factors behind us, we can now realise the full benefit of continued investment in network reach and capacity, as well as from our ongoing focus on enabling access to low-cost smartphones and tablets.”

This is reflected in a recovery in the fourth-quarter, resulting in a better performance in the second-half.

The delay in receiving regulatory approval for the acquisition of Neotel is disappointing. This transaction has been with the authorities for approval for almost a year now.

“In our International operations, service revenue was up 10% (4,5%). Lesotho and Mozambique performed well, while Tanzania and the DRC faced stiff pricing competition.”

The smart device revolution continues, and we now have 26,5-million active data customers and 1,8-million machine to machine (‘M2M’) customers across the Group. Overall data revenue grew 25.0%. In South Africa, the number of smart data devices (smartphones, tablets and modems) active on the network grew by 29,7% to 11,6-million, boosted by the launch of Smart Kicka and Smart Tab, Vodacom’s low-cost branded devices.

“Our focus on network investment is the key enabler behind the increasing contribution that data is making to service revenue. We lifted Group capital expenditure 23,4% to R13,3-billion, adding another 2 576 3G sites across the Group and more than doubling our LTE/4G sites to 2 610. In South Africa, 3G coverage was extended to 95,6% of the population.

“Looking forward, the improvement in fourth-quarter performance gives us cause for cautious optimism. The indications are that we’ve pulled through a transformative period and conditions over the medium term look more favourable.”