Vodacom South Africa to invest R7.7bn in network

Telecoms

South Africa's largest cellular operator, Vodacom, will spend R7.7 billion on its network in the new financial year, of which R6.3 billion will go into its local operations as competition heats up.

Consumers have long complained that South Africa's cellular networks are unreliable, as calls drop too often and data connections are unstable. However, competition for subscribers has increased, with cellular companies investing in networks in a bid to boost data speeds.

Competition increased last year with the launch of Telkom's mobile arm, 8ta, and the unveiling of Cell C's HSPA+ network and subsequent aggressive data pricing strategy.

In February, the Internet Service Providers' Association of SA said continued investment in infrastructure and regulatory advances would increase competition in the sector, which would result in decreased voice and data service prices.

Vodacom CEO Pieter Uys says the cellular operator will pump R7.7 billion into its network this year, up from R6.3 billion in the year to March. Uys was speaking during a media call this morning, presenting the company's results for the year to March.

Its capital expenditure programme will focus on speeding up the rollout of mobile broadband coverage and self-provisioning transmission, to improve the quality of services and support increasing demand for data.

Competition has been heating up, with aggressive promotional pricing from all players, which has pushed tariffs lower, says Uys. Vodacom has been beefing up data capacity on its network and now has 4 290 3G towers, with plans to add another 1 000 this financial year.

 The cellular operator has also upgraded 1,000 base stations in major cities in South Africa to allow for speeds of up to 43.2Mbps. The towers now operate at double the previous speed. Another 1,000 towers will come online at the end of this month.

Vodacom grew group revenue to R61 billion, from R58.5 billion a year ago, and net profit leapt to R8 billion, from R4.2 billion. The cellular company spent R6.3 billion on bolstering its network during the year, of which R5.1 billion was invested in SA.

Data revenue grew 35.5%, to R6.4 billion, and Uys says this area will continue to be a growth driver in the future. Vodacom invested in increasing its data capacity during the year. However, the company's capital investment as a percentage of revenue slowed, going to 10.3% compared with 11.3% last year and 12.5% for the year to March 2009.

The bulk of its capital investment last year went into its local operations, where it spent R5.1 billion. Vodacom says it “continued to make substantial investments in the network, particularly to enhance quality and support the 48.9% growth in data traffic”.

Vodacom's investment mostly went into building a “wider and faster data network” as it added 948 new 3G base stations during the year, it says. “We enhanced the network with the latest technologies, 3 217 base stations have been upgraded to the next-generation long-term evolution-ready equipment and more than 1 000 dual-carrier sites are now live,” it says.

The company adds that its long-distance national fibre build and investment into its project to self-provide fibre to base stations was slower than planned due to delays in getting right of way approvals and the build freeze during the World Cup.

Vodacom spent R1.2 billion on its international operations to support the medium- to long-term growth potential of its African units. “The investment was mainly focused on increasing capacity to support higher traffic and expanding the network in Mozambique,” it says.

However, spend slowed in the Democratic Republic of Congo, where Vodacom has yet to resolve a dispute with a shareholder in the unit. Uys says for Vodacom the process has been slower than expected, but is on track.

Vodacom has been locked in a dispute with fellow shareholder Congolese Wireless Networks, which owns a 49% stake in the operation, for several months over a funding agreement between the shareholders.

Group customers grew 9%, to 43.5 million during the year, with local levels moving back to before the Regulation of Interception of Communications and Provision of Communication-Related Information Act was enacted.

Vodacom now has 26.5 million South African customers. Internationally, the group's subscriber base grew 24.4%, to 17 million.