Vodacom Savings Plan May Hit Distribution Partners in South Africa

Mergers, Acquisitions and Financial Results

Vodacom is targeting R500m in savings next year, a move that is likely to negatively hit distribution service providers.

Vodacom's direct costs, which includes distribution of starter packs, are R20bn, while R6bn is for network costs, and R5bn goes on staff costs. It expects single- digit growth in revenue, which has been hit by lower interconnection fees.

Vodacom Group CEO Pieter Uys said the company would work closely with distribution partners and there were no plans to cancel contracts. He stressed there would not be any job cuts.

An analyst who spoke on condition of anonymity said the biggest savings would likely come from providing its own back-haul transmissions rather than relying on Telkom. He expects Vodacom to trim margins from starter pack distributions. "The target is achievable. There is a lot of cost savings that they can get out of the R20bn direct costs," he said.