ICASA’s 50% cut in mobile termination rates (MTRs) reduced Vodacom’s service revenue by almost R1-billion in the six months ended September 2014.
According to the group’s interim results released today, Vodacom’s South African service revenue declined by 1,3%, mainly due to the MTR cuts.
Despite this setback, Vodacom Group CEO Shameel Joosub says the company performed well and he was decidedly upbeat about future operations.
“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,” Joosub says.
“Against that backdrop Vodacom performed well, adding 7,2-million customers to take our total customer base to 61-million and increasing revenue by 2,3% to R37,5-billion.
“The impact of the lower MTRs was to reduce service revenue by almost a billion rand,” he says. “Excluding this impact, South Africa would have seen service revenue growth of 2,9%. In order to help offset the impact of lower MTRs we have continued to implement a range of cost management programmes.
“Our commercial strategy centres on offering better value to customers in each market segment. In the prepaid market our low cost bundles have proven extremely popular with more than 40-million sold per month.
The post-paid approach has been to offer integrated packages covering all voice, data and SMS needs at a fixed price, allowing customers to more effectively manage their spend. This strategy has enabled us to reduce our blended average effective price per minute by 19%, this resulted in a 17,6% increase in total outgoing traffic.
“To clearly differentiate Vodacom’s services, we invested R4,1-billion in the network in South Africa,” Joosub continues. “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.
“This investment also positions us well to capitalise on data demand which is expected to accelerate as the penetration of smart devices increases. We also completed a six-year project to replace all of our base station radio equipment across the country, meaning that we’re 4G-ready country-wide and just need access to sufficient spectrum to make it operational.
“We have also continued to focus on developing additional sources of growth such as financial services, the enterprise business, and fixed broadband connectivity. The speed of deployment of fibre connections to homes and businesses, which is crucial to addressing South Africa’s relative lack of fixed connectivity, is dependent on the outcome of the regulatory approvals process underway in relation to Neotel.
“Our international customer base increased 20%, with outgoing voice traffic increasing 60% and data traffic more than doubled,” Joosub says.
“This once again highlights the importance of continued investment in network capacity as we increased the number of 3G sites by 44% and the number of 2G sites by 30%. Service revenue grew by 13%, supported by data revenue growth (excluding m-pesa) of more than 50%. Importantly, due to a strong focus on managing costs, we were able to expand the EBITDA margin in these businesses.”