Vodacom revenue declines in South Africa despite customer growth

26 July 2019

Mergers, Acquisitions and Financial Results

Vodacom Group on Thursday (25 July) reported strong customer growth in South Africa in a trading update for the quarter ended June 2019.

However, South African service revenue declined 1.2% to R12.6 billion as the company was ‘negatively impacted by the proactive reduction in out-of-bundle data rates, data usage regulations and the transition between national roaming partners’.

The mobile operator added 608,000 customers in South Africa in the quarter, with 522,000 added in prepaid, while its contract customer base grew by 8.9%. It added 560,000 customers in its International operations, up 5.3%.

Vodacom reported group revenue growth of 4.2% to R21.5 billion, while service revenue was up 3.9% to R17.4 billion.

The group reported strong International service revenue growth of 19.6% to R5.1 billion, supported by continued success in M-Pesa and data.

Group data customers increased to 38.9 million, with Vodacom adding 1.3 million in the quarter. M-Pesa revenue increased 42.7% to R905 million, representing 17.7% of International service revenue.

“Growth from our International portfolio offset the anticipated slower performance in South Africa, which was impacted by new data usage regulations, significant data price cuts and a subdued economy weighing on consumer spend,” said Shameel Joosub, Vodacom Group chief executive officer.

“In South Africa, service revenue was negatively impacted by the further substantial reduction in out-of-bundle tariffs announced in March as part of our sustained pricing transformation strategy to bring down the prices of our data services.

“The impact from three months of ICASA’s data usage regulations, the transition between national roaming partners and the tough retail operating environment, were other contributors to the 1.2% decline in service revenue in South Africa. Acceleration in the growth in data traffic of 52%, and the 45% jump in revenue from our Financial Services business were among the key highlights in South Africa from the quarter.”

Joosub said that the group is encouraged by president Cyril Ramaphosa’s commitment, made in his address at the Fourth Industrial Revolution South Africa Digital Economy Summit, to award new spectrum.

“This is a vital part of reducing input costs and further bringing down data prices in South Africa, where lengthy delays in completing the digital migration and allocating 4G spectrum has curbed the pace at which data prices could have fallen. Clear policy direction for the country’s telecommunications industry is also expected to restore investor confidence in South Africa and boost economic growth.”

Looking ahead, the chief executive said Vodacom expects to conclude the acquisition of the M-Pesa brand and platform and together with the recent launch of VodaPay, to further enhance the performance of the Financial Services business.

“We are also encouraged by the growth potential from the IoT.nxt acquisition and AWS partnership agreement announced earlier this year. We expect growth in the second half of the year to improve in South Africa, benefitting from the completion of the national roaming partner switch over and improved commercial momentum in financial services.”

Source: Business Tech