Vodacom Slashes its Budgets in Tanzania and Congo DRC

Telecoms

Vodacom has cut back its budgets in Tanzania and the Democratic Republic of Congo after its international operations suffered an 8.,1% slump in revenue in its past trading quarter. The two countries were hit by weak economic conditions, intense competition and high excise duties, CEO Pieter Uys said.

Capital expenditure would be slashed as a result, with no more cash to be invested in boosting their network coverage. Vodacom had earmarked R8bn for capex this year, with R5bn for SA and R3bn for the rest of Africa. That R3bn would now be channelled into Mozambique, where Vodacom was still growing, although the cutbacks meant it might not all be spent.

Vodacom's first trading update since listing on the JSE showed a healthy 19.5% growth in subscribers in the quarter ending June 31, with 41.3-million customers in five countries. Group revenue rose 12.2% to R14.2bn for the quarter.

But the average amount that South African users spend each month fell a noticeable 4.7% as they struggle under poor economic conditions and as cellphones reach deeper into the lower-income markets. Customers in SA spent an average of R64 a month in the quarter, down from R65 a month previously. Partly compensating for that was Vodacom's ability to sign up 1.1-million new customers in SA to reach 28.7-million users.

Uys said the main reason for its growth was innovative pricing. He hoped the gradual lowering of its call fees -- and some dramatic savings when the network is not busy -- would take pressure off the operators to cut the interconnection fees they charge each other for switching a call from one network to another. Uys said he had met Communications Minister Siphiwe Nyanda to discuss interconnection fees and they were working on some proposals.

Of equal concern is the new legislation calling for anyone who owns a SIM card to be registered. Uys said the operators had spent "a couple of tens of millions" of rands on installing equipment to capture those details. Now they faced a fee of about R3 a person for capturing data on SA's existing 50-million SIM card owners.

Business Day