Growing demand for data services, particularly in South Africa, has once again buoyed revenue growth for Vodacom despite the impact of reduced interconnection rates and a more competitive environment. The group’s international operations have also shown growth but have been negatively affected byrRand strength. Focus remains on Vodacom’s consumer businesses.
Vodacom annual results, released today for the period ended 31 March 2011, reveal a 4,5% increase in revenues to R61,2-billion from R58,5-billion in the prior period. EBITDA margins remained stable at 33,7% with the group generating R20,6-billion EBITDA in the current financial year. Operating profit improved by 21,9% to R13,7-billion, from R11,2-billion previously, despite a further impairment of R1,5-billion of the Gateway operations.
The South African telecommunications landscape, from which Vodacom derives 86,2% of its revenue, has become considerably more competitive over the last year. The entry of Telkom’s 8ta into this space, and a more aggressively positioned Cell C has resulted in downward pressure on prices and margins.
Frost & Sullivan ICT industry analyst Protea Hirschel comments: “Vodacom’s increased promotional activity over the last year has focused on adding value to its service offering, rather than inviting only price comparisons to its competitors’ services.”
The group’s rebranding to the Vodafone livery will allow it to reposition its brand message accordingly.
This has paid off in strong growth of contract customers, up 14% to 5,1-million, and an increase in ARPU to R157.
Growth in data services continues on its high trajectory resulting in a growing proportion of data revenues. Data revenue increased by 35,5% to R6,4-billion.
Hirschel suggests: “Vodacom’s hand set strategies, particularly around smart phones, tap into the importance of these devices as a driver for data services.”
Vodacom is also diversifying into other products ranging from mobile money to music downloads. “We expect Vodacom to be following the lead of its parent company in developing other markets in future, such as mobile health and machine to machine communications,” says Hirschel.
Not surprisingly, capex of R5,1-billion for the South African network was geared at improving data services by upgrading base stations and expanding the self-provisioned transmission network. Hirschel comments: ”Not only will this increase average speeds for subscribers over the medium term, but the group will also gain additional capacity which should improve its cost structures in future.
“Streamlining of the group’s organisational structure in conjunction with the rebranding should result in greater agility when faced with maturing and competitive markets.”
Vodacom’s international operations continue to disappoint in their contribution to overall revenue with Rand strength a major factor. Hirschel adds: “Further impairments around Gateway suggest that Vodacom’s African strategy on the connectivity side is not meeting initial expectations.”
However, service revenue in the international mobile operations grew by 11,6% in constant currency over the year, and 3,3-million subscribers were added to the international operations. Here too, data revenues have increased substantially.
Like South Africa, Vodacom’s international markets are increasingly competitive. Hirschel says: “This is particularly the case in Tanzania where price competition is intense, and the DRC where Vodacom has lost its market leadership position.” In Mozambique a third operator is expected to go live in early 2012.
Vodacom’s DRC operations are complicated by ongoing arbitration to resolve a conflict with its equity partner.
Vodacom declared a final dividend of 280 cents per share, bringing the total dividend for the year to 460 cents per share.